Ministers approve People's Bank

By VERNON SMALL deputy political editor

Senior Labour ministers have set aside their reservations about a new state-owned Kiwi Bank, clearing the way for Alliance leader Jim Anderton's pet project.

In recent weeks key ministers, including Prime Minister Helen Clark, have been increasingly cautious about the New Zealand Post-run bank, despite widespread expectations that it was a political "must-do" to reward the Alliance for its support of Labour's flagship policies.

It is understood that one of the five scenarios in an independent report into the bank, prepared for NZ Post, was doubtful about its profitability.

But sources said a cabinet committee had given approval for the bank last week after close consideration of the report had eased its concerns.

A recommendation is now expected to go to the full cabinet for final approval on Monday and an announcement is expected as early as Tuesday.

Finance Minister Michael Cullen and Mr Anderton would not confirm the bank was on Monday's cabinet agenda, but neither ruled it out.

It is possible the so-called People's Bank, offering lower fees and a full range of services through New Zealand Post's branch network, could be running by October.

Any later, and the launch date would have to be delayed until 2002 because NZ Post is too busy with Christmas mail in November and December to consider launching such a big project late in the year.

The Government is likely to invest between $40 million and $80 million in the new bank.

Dr Cullen late last year dropped his blanket objection to an injection of crown cash.

Treasury officials have advised against the new bank, but NZ Post's board and management are enthusiastic.

They see it as a way to diversify the state-owned enterprise's core business as electronic mail erodes the volumes of ordinary mail.

They are also keen for NZ Post to develop banking expertise to improve its chances of winning overseas management contracts.

The bank is expected to offer over-the-counter services at 340 branches. Services will include mortgages and loans at commercial rates.