Bernard,

Is it worth doing an 'Update' regarding what you have said here:

http://www.interest.co.nz/news/analysis-bank-profits-interest-rates-are-...

"You may be right about gouging some sectors and not others. The numbers I refer to for the whole of the banks. I believe, for example, that banks have increased their margins sharply for business loans but have left them reasonably low for mortgage lending, creating a cross subsidy."

What analysis could you do to determine which sectors might have been gouged please?

Les Rudd
Invited Member
NZMEA

Bernard,

Thanks for your efforts, that might be quite useful.

Re. "banks have increased their margins sharply for business loans but have left them reasonably low for mortgage lending, creating a cross subsidy."

Is there any way you could quantify/qualify that subsidisation as well please?

Also, notwithstanding all sorts of lobbying efforts from Bill English, Finsec, Fed.Farmers, Alan Bollard, PEC, NZMEA, et al - given the Auz banks seem to be signalling unwillingness to support business loans as many might like, would it not be possible to create a commercial solution with Kiwibank, or a new arm of Kiwibank, being capitalised specifically to support said business debtors?

Bernard,

Thanks again. The question I was fumbling to ask is, is it not possible for KB to be capitalised in a way, via govt., so that business rates they offer can be lower? And I was thinking more in terms of a temporary arrangement when I said "new arm of", and was envisaging an arm that might take on said business debtors that are at/beyond a 'struggle threshold' cash-flow wise who could well have sound businesses but are struggling for no other reason than the compound effect of income slow-down, but in particular increased cost of capital. I know it'd be a hard call on judging who's in and who's out in such a situation, but it might improve business survival rates if the cost of capital problem could be dealt with temporarily in this, or some sensible way?

Thanks, Les.

Bernard,

Thanks. Hear what you say, re. taxpayers taking on the extra risk. But it seems we are anyway re. support to 'the banks' and some would argue they are not coming to the party as we/some might like. So, in taking on said risk with KB in the way suggested, at least taxpayers get the payback of reduced risk of businesses/jobs getting canned. So a worthwhile tradeoff that does seem fair/fairer on taxpayers - who get to keep their jobs and businesses they might otherwise lose but for the sake of cost of capital.

What do you think?

Cheers, Les.

Waymad - understood. I agree, no point trying to treat the dead when time would be better spent on the living. However, I'm thinking more in terms of businesses (define as you wish) where their main threat is a cost of capital spike caused by the present situation and the amplified tendency of banks here to be more sympathetic to bricks and mortar (or weatherboard and rot!) as is very well known and supported by Bernard's comment:

"I believe, for example, that banks have increased their margins sharply for business loans but have left them reasonably low for mortgage lending, creating a cross subsidy."

Which is no surprise I suppose given the other generous subsidy their businesses enjoy by not having an effective capiatal gains tax in NZ.

Bernard Hickey Says:

April 17th, 2009 at 12:23 pm
Les,

Fair question. Government would have to pump in more capital and Kiwibank would have to run easier lending policies than the big banks.
Taxpayers, essentially, would have to take on the extra risk of business failure.
Fair on taxpayers?
cheers
Bernard

Les Rudd Says:

April 17th, 2009 at 12:32 pm
Bernard,

Thanks. Hear what you say, re. taxpayers taking on the extra risk. But it seems we are anyway re. support to "˜the banks' and some would argue they are not coming to the party as we/some might like. So, in taking on said risk with KB in the way suggested, at least taxpayers get the payback of reduced risk of businesses/jobs getting canned. So a worthwhile tradeoff that does seem fair/fairer on taxpayers - who get to keep their jobs and businesses they might otherwise lose but for the sake of cost of capital.

What do you think?

Cheers, Les.

Bernard & Les,
Les you state the obvious to Bernards post.
The legislation already exists to allow us to do it. It has been done before. But with the control that the Borderless Banker Empire currently has, such a move is very much on the not "generally accepted worldwide best practice list".
And now that we have have one of the banking empires favourite sons at the helm the political will for KB to keep the foreign banks in check will/has evaporated. The only thing that will return it will be a change of government.

Bernard,

What's really going on?

It seems Brian G would be supportive of your's and Roger K's take on things:

Brian Gaynor: Cost of funding lets Australian banks off hook

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1057...

but RBNZ and Bill E not so?

Banks slapped over stalled rate cuts

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10572178

and:

http://www.stuff.co.nz/the-press/news/2409364/English-tells-banks-to-cur...

Anyway, re. what you've said above around business debtors cross subsiding domestic, have you got a feel for much of same happening across the Tasman?