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Commerce Commission criticised for 'technocratic rather than democratic' bank competition probe, by consultancy Habilis, which wants it to protect the weak rather than play the role of a neutral umpire

Banking / news
Commerce Commission criticised for 'technocratic rather than democratic' bank competition probe, by consultancy Habilis, which wants it to protect the weak rather than play the role of a neutral umpire
Consumers aren't on an even playing field with their banks, Habilis NZ argues.

The Commerce Commission is being urged not to play the role of a neutral umpire between New Zealand's Australian-owned banks and their critics in its probe into bank competition, and support consumers by developing and sharing an economic model on how the NZ banking sector actually operates.

This suggestion comes from Habilis New Zealand in a cross-submission on the Commerce Commission's Preliminary Issues Paper in its market study into competition for personal banking services. Habilis describes itself as Aotearoa’s leading wellbeing and social investment consultancy and a consumer advocate. It says there's a strong argument the Australian-owned banking oligopoly has "fully exhausted their social license to operate in Aotearoa, and are now in the business of the unjustified enrichment of their offshore shareholders."

The Commission's market study into retail banking competition is focusing on deposit accounts and home loans. The Australian-owned ANZ NZ, ASB, BNZ and Westpac NZ have between 85% to 90% of mortgage lending and deposits. The Commission expects to issue its draft report in the market study in about March next year.

Talking about the public rather than to the public?

Habilis Principal Consultant Kent Duston told the cross submission comes from a concern the Commission is talking about the general public but not to the general public.

Duston cites "widespread concern" about both the profitability and dominance of the Australian-owned banks, noting they're both very profitable by international standards and have a very low risk profile by international standards. The cross submission was done off Habilis' own bat.

"It seems like the Commerce Commission were talking about the general public but not to the general public and that was the thing that led to our cross submission, those concerns," Duston says.

Duston says even a survey of personal banking customers the Commission's having done is "talking about us not to us."

"The [Commission's] work plan from here is really not visible. There's nothing further until the draft report in March [and] it's not apparent what's happening in the meantime. Is it [the Commission] acting as counterweight to the banks, or playing the neutral referee?"

Equity issues

Habilis says because the Commission is taking a technocratic rather than democratic approach to its market study, there are equity issues impeding a consumer-centric response to the big banks' submissions. It argues the very existence of the market study and the issues paper hasn't been well communicated by the Commission, with no evidence of advertising on traditional or social media, and little proactive communication outside the banking sector itself.

"This is entirely puzzling. The issues canvassed in the market study affect 99% of New Zealanders with a bank account and have far-reaching impacts on our entire economy. As the Commission’s Preliminary Issues Paper notes, there is prima facie evidence that the Australian banks are making excessive profits, well beyond any reasonably expected return on capital, which means billions of dollars are being siphoned out of the pockets of New Zealanders to provide the undue enrichment of predominantly offshore investors," Habilis says.

"Given the wide-ranging social and economic impacts of this pernicious behaviour and the interplay with the regulatory failures that have led to it, the low-key approach of the Commission makes little sense. Comparable issues – such as the proposed Three Waters reforms, or even regional transport projects such as Let’s Get Wellington Moving – are much more widely communicated and debated, and have active and organised engagement processes, even when their societal impacts are orders of magnitude lower."

"For all intents and purposes, the Commission appears to be taking a technocratic rather than democratic approach. The barriers to finding out about the market study, engaging with the process and providing submission to the Commission on the substantive matters have been set very high, and this is a genuine impediment to wider participation," adds Habilis.

It goes on to say the language used by the Commission "views the 99% of New Zealanders with a personal bank account as a passive group on whom banking market participants act with impunity." Habilis labels it "disempowering and exclusionary," saying it underlines the degree to which the Commission is "pursuing a technocratic process at the expense of the very people it should be representing."

"Markets are not theoretical constructs; they are made up of people making decisions about the wellbeing of themselves and their whānau every day; sometimes well, sometimes badly, sometimes under duress, sometimes with incomplete information, sometimes because they have no other choices. All of these people are legitimate stakeholders, not merely a passive group," says Habilis.

"And irrespective of the terms of reference of the market study, the Commission does not have license to exclude the vast majority of New Zealanders from providing valid input into considerations that will have significant and wide-ranging impacts on their lives. But exclude them it has."

Countering '150-odd pages of smoke screens and water-muddying analysis'

Habilis goes on to say that allowing just two weeks for cross-submissions following receipt of the initial submissions is too short, failing to allow a viable timeline for consumer advocates to assess and respond to the analyses presented by the major banks.

"To require advocates to assess, assimilate and then author detailed responses to highly technical information in half the time of an Official Information Act request seems either deeply optimistic or intentionally exclusionary," Habilis says.

"For instance, the ANZ economic analysis from Incenta runs to 40 pages; the ASB analysis from NERA and Bell Gully to 20 pages; the Deloitte study from BNZ to nearly 60 pages; and the Westpac response to 18 pages. These are all complex documents containing economic and financial analyses with international context, many of which contain references to other research papers and studies."

The submissions from the  Australian-owned banks were prepared by "multi-person teams from some of Aotearoa’s leading consultancies and law firms, working for some months," says Habilis. They are complex "advocacy documents" intended to promote and support the banks' position, "designed to be inaccurate and misleading." This means responding to them is a significant undertaking, Habilis, says, describing the big banks' submissions as "150-odd pages of smoke screens and water-muddying analysis."

Habilis expresses concern arguments from the Australian-owned banks won't be refuted, saying it's not even clear the Commission will be doing this.

"Instead, it appears the Commission wishes to play the role of a neutral umpire, merely adjudicating the competition between the Australian banks and their detractors."

Meanwhile consumer advocates don't have the resources, including the budget, of the Australian-owned banks to respond to Commission's market study, especially not in the tight timeline. Habilis notes Consumer NZ's point that: "It is simply the reality that, as a not-for-profit, we do not have the funding support required to fully participate in the process."

This means there's a significant power imbalance between the big banks and their customers, a difference in financial and human resources spanning "many orders of magnitude."

This, Habilis argues, means the Commission needs to develop a suitable economic model as a matter of urgency and provide open access to it, to all interested parties. The model should include; documentation of its design to ensure all users understand the model's assumptions, parameters and limitations, details of the model’s data sources, interactive capability to allow hypotheses to be tested and validated, and a mechanism for generating outputs.

"As philosopher John Rawls notes, the basic principle of justice is that the interests of the weakest and poorest groups must have first call on the protective power of the state. And the Commerce Commission is the manifestation of that protective power in the context of the abject market failure in the banking sector. This, therefore, is the obligation of the Crown: to protect the weak, in this case consumers, from the depredations of the powerful, in this case the Australian banks," Habilis says.

"The market study increasingly seems like a game played by professionals against us amateurs. The Australian banks far outweigh us in money and resources, and the Commission has tilted the playing field towards the technocrats who have the requisite domain knowledge, yet we are being expected to play as if all participants are equal."

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Asking the wrong question.  Ask not why Australian banks are so profitable but ask why NZ banks are so uncompetitive.  No deposit guarantee, lack of access to capital, lack of trust, switching costs, heavy regulation ....

In Australia, the banking market got competitive when Macquarie Bank decided to play.  Its now a $60B big bank (compared to Westpac which is $73B).  In NZ Kiwibank had the opportunity to be the market disrupter but successive Govts did nothing with it. 


According to the Reserve Bank, the new capital requirements mean banks will need to contribute $12 of their shareholders' money for every $100 of lending up from $8 now, with depositors and creditors providing the rest.

Past time for banks to share the profits with the main loan underwriting creditors - particularly those that are under rewarded and unsecured.


And people are worried about investors leveraging their equity growth to build new apartments.  lol what tune are they playing Nero?


so far the commerce commission have proven ineffective in generating any change for the fuel, building and grocery industries- given they  are about to go up against the big boys who have already played this game with the ACCC and ASIC - I'm not suspecting there will be any change in the banking industry. It's going to be like the All Blacks vs Napier Boys Under 12's.


There are far more interesting submissions than that from a pretentious think tank from 'Tamaki Makaurau'

Take this one from the Financial Services Federation:

The sheer volume of regulation, both current and upcoming or proposed, as outlined in Tables 1 and 2 of the Paper, applies equally to non-bank financial services providers as it does to the registered banks. But the FSF would argue that the non-banks have limited ability to resource this when they have so few staff available to them (who all have responsibilities to the running of all other aspects of the business), and limited budget to hire yet more compliance staff or to engage professional services firms to assist with ensuring their compliance.

This necessary focus on compliance comes at the cost of innovation and therefore increased competition.

If the FSF was to single out one piece of legislation or regulation that has done more to stifle innovation and competition than any other, it would have to be the December 2021 changes to the Credit Contracts and Consumer Finance Act 2023 (CCCFA). The highly prescriptive process that these changes introduced to the way in which lenders are expected to assess the suitability of their loan products and their affordability, coupled with the extremely punitive personal liability on lenders’ senior managers and directors means that all lenders have to apply a “one size fits all” approach to their credit process which leaves no room for lender discretion or judgement.

This has resulted in severely limiting access to credit for consumers from responsible lending providers if a customer, who they might previously have been able to assist using their experience and judgement, does not tick all the required boxes. The problem here is that the customer’s need hasn’t gone away just because a lender has declined their loan and that leads to desperate people seeking the lender of last resort to meet that need which may lead them to a provider for whom compliance is not so important.

It has also led to lenders quitting the consumer lending market altogether to focus on less heavily regulated business lending which is certainly not helpful to promoting a competitive market.


Already in the firing line, I believe. 


+1 well written article


The pic with this article showcases the situation well. The problem is nothing will change. Sigh.


Excellently made point.