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Manukau City has rejected a community banking initiative, saying it would not add any value to the community.
A council committee decided on Tuesday night not to participate in a collaboration with Kiwibank to create a community-owned bank.
Manukau is one of six councils considering the initiative, which aims to return funds to its community.
Councillor Jami-Lee Ross said Kiwibank already had a strong presence in Manukau, and residents had access to many banking facilities.
He said the council doubted a community bank could survive in a competitive banking market. The idea was more suited to a rural area. "We are not convinced that community banks would be viable in Manukau and with establishment and operational costs to consider, we believe they would struggle to be profitable."
An initial report on the scheme by Porirua council officers said councils were not expected to take on financial risk, and franchise income would cover the cost of renting council buildings to house the branches.
However Mr Ross said: "The proposed model would have been through a trust that would be a Council Controlled Organisation, reliant on council funding to set up. We hold the view that providing banking services is not a role that should be undertaken by Manukau City Council."
The report estimated that each branch would cost $50,000 to set up.
Other councils considering the community bank collaboration were Porirua City, Far North District, North Shore City, Thames-Coromandel District and Opotiki District.
The plan was based on Australia's Bendigo bank, which had established more than 200 community-owned branches. Some contribute more than $100,000 back to their communities.
Kiwibank franchises were already being successfully operated by councils in Bluff and Cheviot in the South Island.
