KEY POINTS:
Winston Peters' plans to pump up Kiwibank to take on the world has merit but would likely be overwhelmed by the impracticalities, says a banking expert.
Mr Peters wants to expand Kiwibank and direct all government banking through it to stop the "voodoo economics" of New Zealand banking profits going offshore to Australian banks.
Mr Peters said the expansion would be funded by floating a 24.9 per cent share to the public - shares that could only be held by New Zealanders.
Massey University's head of banking studies David Tripe said there would be several challenges that would make Mr Peters' scheme difficult to put into practice.
"While there is some merit, I don't think its instant nirvana" said Mr Tripe. "Kiwibank would continue operating [under Mr Peters' scheme]. Would it engender huge changes in the way New Zealanders receive financial services? I doubt it."
Mr Peters' plan would see Kiwibank separated from NZ Post.
Mr Tripe said this would make it "more transparent", as he was not convinced of Kiwibank's contribution to New Zealand's profits. He said Kiwibank "might struggle" without NZ Post.
Mr Tripe said selling shares would help, and "by floating it to New Zealand Mums and Dads you engender a broader block of stakeholders supporting the bank and with a stronger relationship because of the ownership stake".
Mr Peters also plans to put the $55 billion of government business through Kiwibank - a contract held by Westpac.
Mr Tripe said much of this sum was transactional and was not necessarily hugely profitable. While Westpac would be making a profit off the government contract, if it was extracting excessive profits, the Government would move its banking elsewhere.
Mr Peters' plan is for Kiwibank to become a market leader and drive prices of the other banks down.
Mr Tripe said if floated, it might not enjoy the AA- credit rating it gets from NZ Post - "although in the current environment, credit ratings don't matter".
