KEY POINTS:
The Government is reportedly seeking to boost local ownership of the Australian-controlled major banks here in return for a wholesale funding guarantee the banks say is needed to ensure they can raise sufficient cash to keep the economy ticking over.
Finance Minister Michael Cullen was last night reported
as saying a partial float of Australian bank shares on the New Zealand sharemarket may be a condition of the wholesale funding guarantee for banks Treasury and Reserve Bank officials are currently drafting.
"Clearly that should be considered carefully as we move towards finalising any details of this scheme," Dr Cullen told TVNZ News.
But National Party finance spokesman Bill English said he would be concerned if Government insistence on such a concession prevented the timely introduction of the guarantee.
"We are now only eight or nine weeks from Christmas and the banks have raised the possibility they may have funding problems that would lead to a sharp contraction in lending by then."
The four big Australian-owned banks say with other countries including Australia having announced wholesale guarantees, they will be disadvantaged when competing for funds on international and even domestic money markets. The big local banks raise somewhere between 30 and 40 per cent of their funds on these markets.
Mr English said a partial float of bank shares on the NZX "would open up a whole Pandora's box of issues that you couldn't resolve in time within the time period required to get a guarantee in place".
New Zealand's four major banks - ANZ National, ASB Bank, Westpac and BNZ - which between them hold more than 90 per cent of the local banking sector's assets, are all wholly-owned subsidiaries of Australian listed parents.
Dr Cullen was last night unavailable to clarify whether the float proposal would involve shares in the parent banks or new shares in their local subsidiaries.
Tax would also likely prove to be a thorny issue in any float proposal. New Zealand shareholders are at present effectively taxed twice on shares they own in Australian companies including banks, discouraging them from holding them.
The proposed wholesale funding guarantee will see the Government, and in turn the taxpayer, pick up the tab if one of the Australian banks was to fail. This would result in a total contingent liability of about $300 billion in addition to the $150 billion contingent liability resulting from the retail deposit guarantee announced earlier this month.
* Meanwhile the previously unlimited deposit guarantee was yesterday limited to $1 million per depositor per guaranteed institution.
Reserve Bank supervision of finance companies, which was due to begin in 2010, may be fast tracked and fee structures changed under a second round of tweaks to the hastily conceived scheme.