Risks for taxpayer in bank nostalgia
The Government and Deputy Prime Minister Jim Anderton, to be more specific, seem intent on setting up a people's bank.
Something, it seems, like the old Post Office Savings Bank and probably based on New Zealand Post's network.
But what is the problem they are seeking to solve? Branch closures and high fees are principal concerns. But envy at large profits being made by the foreign-owned major banks and a sentimental attachment to the past may also have something to do with it.
Mr Anderton alluded to the fees issue this week when he accused the banks of reversing roles with the 19th century Australian bushranger Ned Kelly, saying that these days it was the banks who robbed him.
Beyond doubt, the banks are charging more for transaction services than before, and they are closing branches and depriving some rural communities of ready access to bricks and mortar.
Then again, the number of electronic channels has multiplied and the internet is quickly shifting banking from the street corner into the living room.
Nevertheless, Mr Anderton still wants low-cost public and community banking readily available to ordinary New Zealanders.
The question remains, how is he going to do it without losing heaps of taxpayer money on the way? The banking system is vastly different from that of even 20 years ago. Banks are charging more in fees. But that is because the days are gone when they used fat 4 per cent loan margins to subsidise counter transactions.
Instead, cherry-pickers, which may soon include The Warehouse as well as Farmers, have pushed back loan margins to the point where the banks have little choice but to charge for transaction costs where they arise.
While Mr Anderton was not actually saying so, the kind of bank he envisages will most likely serve those on low incomes and beneficiaries - the very customers least liked by mainstream banks. They bring little in low-cost deposits, they have higher delinquency rates and disproportionately high numbers of transactions.
That is not to say that something should not be done to ensure all New Zealanders have access to bank services.
The problem has been grappled with overseas. Some countries have adopted regulatory solutions, under which all banks are forced to offer low-cost accounts to anyone who wants them. Admittedly, they are less inclined to promote them, which could be a matter for regulation as well.
But it does allow for a level playing field and avoids the huge establishment costs of hanging a bank off NZ Post. More to the point, it avoids the risk to the taxpayer and NZ Post that things might go horribly wrong.
<i>Between the lines:</i> Richard Braddell
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