The Government is set to announce a Commerce Commission market study into the banking industry on Tuesday, interest.co.nz understands.
A market study is an in-depth study into the factors affecting competition for particular goods or services, to find out how well competition is working in a specific sector of the economy, and whether it could be improved. Full details of the study will be revealed when the official announcement is made.
Earlier market studies have focused on retail fuel, retail grocery and residential building supplies.
Speculation has been swirling for months that banking could be the subject of the next market study. The opposition National Party proposed a quicker but shallower Select Committee inquiry instead. And the Green Party and First Union called for a levy on bank profits.
The banking sector is dominated by the highly profitable Australian-owned oligopoly of ANZ, ASB, BNZ and Westpac. In February Reserve Bank Chief Economist Paul Conway told Newsroom the banking sector "would be an appropriate focus for a market study, should the Government wish to go there."
In March Roger Beaumont, CEO of bank lobby group the New Zealand Banking Association (NZBA), said bank profits look big because banks are among New Zealand's biggest companies. Beaumont said NZ's banks were profitable, well-regulated and resilient, and that was important in the current economic climate.
“Last year banks made a net contribution to our economy of $1.92 billion. They spent $9.1 billion running their businesses and paying tax in New Zealand, compared to combined profits of $7.18 billion ... Our banks’ average return on equity is 13.4%, which falls in the middle of the pack when compared to other major New Zealand companies," Beaumont said.
NZBA could not be reached for comment on the latest development.
Asked about the potential for a Commerce Commission market study BNZ CEO Dan Huggins told interest.co.nz in May that BNZ would cooperate with any such study but he didn't think it was necessary.
"If the Government chooses to do that then clearly we'll participate and we'll provide whatever is requested of us," Huggins said.
"I think the industry is incredibly competitive, there's 30 banks, building societies and credit unions. There's lots of choice. The industry is already highly regulated by strong regulators to ensure good outcomes. We are delivering good customer outcomes. And therefore I don't think it's necessary to have that review," said Huggins.
The market study into the grocery industry found the industry was dominated by a duopoly of Foodstuffs and Woolworths NZ, whose practices inhibited the growth of competition.
An earlier report found an active wholesale market did not exist for the motor fuel industry in NZ, and this weakened price competition in the retail market.
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