Jim's bank - how it adds up

The people's bank is on its way to a town near you. FRANCESCA MOLD looks at what it will offer and how it will differ from other banks.

What services will the new bank offer?


The bank, as yet unnamed, will aim for customers it describes as the average New Zealand family interested in everyday banking.

Customers will be able to deposit and withdraw money at the counters of 321 New Zealand Post Shops. The bank is expected to offer free junior accounts to help young customers save. It will also provide savings, cheque accounts, limited overdraft facilities, mortgages and credit cards.

Its eftpos cards will be able to be used at some existing automatic teller machines (ATMs) - likely to be those of WestpacTrust and ANZ.

It will offer telephone and internet banking.

The new bank will provide weekend banking in line with Post Shop hours, something which distinguishes it from other banks with their restricted hours.

It will not offer corporate or business banking services.

Whose idea was it to set up the bank?


New Zealand Post began developing the proposal more than two years ago as a way to expand its business.

The idea fitted with concerns expressed by Alliance leader Jim Anderton, who has consistently campaigned against bank fee increases and branch closures.

The Alliance championed the proposal at the 1999 general election because it fitted with a key plank of the party's policy to have a New Zealand-owned bank easily accessible to customers in all parts of the country.

How will the bank be set up and who will pay for it?


The Government will give New Zealand Post $72.2 million to pay the setup costs, as well as allowing the company to keep $6 million of its profit this year.

The bank will be set up as a wholly owned subsidiary of New Zealand Post, with an independent board and chief executive who are expected to be appointed in the next three months. New Zealand Post must also apply for a licence from the Reserve Bank.

What if the bank fails?


New Zealand Post says the bank needs at least 100,000 customers to break even. It believes this will be easy to achieve because up to 175,000 New Zealanders switch banks every year.

New Zealand Post predicts the bank will make profits after three years and will have repaid the Government's cash contribution within seven years. It has been suggested that in 10 years the bank could be worth $500 million.

But New Zealand Post is also developing an "exit strategy" for the bank in case it runs into financial trouble. It says that even if the bank fails in the first three years, the Government's investment will not be totally lost as it could sell assets it had built up.

The new venture is considered less risky than other banks because it will provide only personal banking and will not do corporate business.

While it has no Government guarantee, ministers and New Zealand Post have assured depositors their money will be safe.

What will the new bank charge its customers?


There will be transaction fees, as with any bank, but the exact costs are yet to be revealed. New Zealand Post managers have indicated that fees will be on average 28 per cent lower than other banks charge. It says that by using existing branches to provide banking services, it can keep overhead costs to a minimum.

Will security be boosted at Post Shops?


Yes. Post branches will be extensively upgraded to provide the same level of security as at other banks. New Zealand Post has hired bank security experts to supervise the upgrade. The cost of the refit will be covered in the setup money provided by the Government.

When will the bank be up and running?


New Zealand Post says the bank will be operating by February 2002. The Alliance would like it to be in business much earlier, but New Zealand Post thinks that unlikely.

How can customers sign up?


New Zealand Post has not yet set up an official way for people to register their interest in joining the bank but says it has already received telephone calls from potential customers.

It intends to keep a database with names and addresses of potential customers so it can send out information closer to the time of opening.

Will there be new jobs created?


Mr Anderton claims the bank will employ more than 100 new staff.

But New Zealand Post has taken a more reserved approach.

It says a number of people will be hired immediately to work in marketing and developing the bank.

There will also be a "marginal" increase in the number of Post Shop workers, depending on the growth in customers.

Existing staff will be retrained to deal with banking, although managers say they are already experienced in dealing with $2 billion in payments and agency banking taken over the counter each year.

What about all the fuss over the leaked business plan that has raised concerns about the bank?


National leader Jenny Shipley has been releasing snippets of information from a leaked business plan over the past two weeks highlighting potential problems the bank may face.

The new bank's reliance on WestpacTrust and ANZ machines could drive up ATM fees, according to the leaks, and the bank has allegedly categorised beneficiaries as an undesirable cost.

Mrs Shipley's actions have been condemned by the Government and New Zealand Post as "fiscal treason."

But Mrs Shipley says she is simply releasing information that New Zealanders have a right to know before investing in the new bank. She now claims to have shredded the document.

Act leader Richard Prebble also claims to have a copy of the plan. He tried to table it in Parliament yesterday but was refused permission.

When asked how much damage the leaks had done, New Zealand Post chairman Ross Armstrong said it was difficult to assess.