Four Australian-owned banks dominate the sector in New Zealand.
An inquiry into New Zealand’s banking competition, or lack thereof, is under way.
In June, Finance Minister Nicola Willis wrote to the Finance and Expenditure Committee, saying it would include “broad and deep criteria to focus on competitiveness, customer services, and profitability”.
There will also be a focus on rural banking and lending.
The terms of reference are still being ironed out, but Willis has made it clear the chairpersons and chief executives of banks operating in New Zealand will be “made available for questioning”.
A Commerce Commission market study has already found a lack of competition among our largest financial institutions – with a full report due next month.
Victoria University of Wellington associate professor of economics Martien Lubberink told The Front Page New Zealand has a very concentrated banking environment.
“That is not atypical. It’s normal in many countries like France and the Netherlands. They also have a concentrated banking landscape with a few dominant players.
“What is typical here is that the profitability of the large banks is very high, whereas the profitability of the smaller banks is too low and I think that creates a bit of tension.”
Lubberink praised the Commerce Commission study and said some suggestions in it could improve the banking experience of customers.
“The main recommendations are very much focused on helping the smaller banks and I struggle with that a bit because the smaller banks are vulnerable and we expect a lot of solutions from them. Whereas the bigger banks are much more powerful, stronger, and more resilient.
“It’s kind of asking the mouse to beat the elephant,” he said.
Lubberink said the lack of competition in the sector has created a tardiness when it comes to innovation and new technologies.
“The expectations are that the smaller banks are meant to be competing, which I think is beyond belief in a way.
“Innovation should come from the largest banks, the big four, they should be leading so we have a stable financial system. There’s not a lot of issues. It’s just the slowness and tardiness of the innovations that probably upsets people,” he said.
It’s now more than half a decade since Australia’s banking industry came under the spotlight of a Royal Commission – with billions of dollars returned to customers, thousands of pages of new laws, and reams of court cases.
ABC business reporter Daniel Ziffer told The Front Page that the scandals that led to the commission were mainly to do with banks putting the interests of customers well below the interests of the institution.
“The public scrutiny is still there, but they certainly have laundered their reputations. I don’t mean that in a malicious way. They’ve actually improved what they do from where we were a decade ago.”
Australians have also fallen victim to intricate online scams, something that Ziffer said is only becoming more sophisticated.
“There is certainly a very live discussion here about how much consumers need to wear, how much care they need to take, and how much responsibility banks should take given that they certainly have access to more power and more systems.
“The good things that are happening here, I’m sure similar is happening in New Zealand, is that they are working with the telcos and utility companies to change those systems and make them more secure,” he said.
New Zealand is currently looking at introducing “confirmation of payee” – which essentially is the ability for customers to check the account owner’s name and account number match when they are about to make a payment.
Given New Zealand’s four largest banks are Australian-owned, the early findings of the Royal Commission into the banking sector there raised questions about conduct in New Zealand, leading to a Reserve Bank (RBNZ) and Financial Markets Authority-led review of bank conduct and culture in 2018.
The Finance Minister’s office said the findings of the report led to the introduction of the Conduct of Financial Institution (CoFI) Amendment Act, which aims to ensure that financial institutions treat consumers fairly.
“Registered banks, insurers, and non-bank deposit takers are required to have a CoFI licence in place by March 31, 2025,” the Finance Minister’s office said in a statement.
“Earlier this year, the Minister of Commerce and Consumer Affairs has proposed to review CoFI legislation.”
Listen to the full episode to hear more about New Zealand’s banking sector and what can be done to make it better for consumers.
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.
You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts.
Aircraft ordered and due to arrive and begin operating in September 2026.