Opinion: Bernard Hickey argues NZ's big four banks shouldn't be making such big and growing profits while our economy and lending growth is so weak

Opinion: Bernard Hickey argues NZ's big four banks shouldn't be making such big and growing profits while our economy and lending growth is so weak

By Bernard Hickey

This week's announcements by ANZ and Westpac of a combined NZ$1.539 billion in net profits were remarkable in two respects.

Firstly, the rest of the economy is doing it very tough with small to medium business profits down and household disposable spending down. After four years of recession or near recession it doesn't feel like the boom time of 2007 again. Yet the banks, including ASB and BNZ, produced a combined profit in the last year of NZ$2.778 billion, up 27% or NZ$590 million from the previous year and up (yes up) 3% or NZ$78 million from the previous record year of 2007.

See Gareth Vaughan's article on ANZ's profit, on BNZ's profit, on Westpac's profit and ASB's profit.

This is doubly amazing given lending growth across the banks in that boom year to September 2007 was 14%. In the just completed year to September lending growth was 1.9%.
The banks have benefited from a fall in bad debts as the economy has crept out of recession, but the biggest driver has been an improvement in their net interest margins. This is the measure of the 'profit' the banks claim after they receive interest from their lending to businesses and households and pay out interest to the depositors and other banks that they borrow money from, both here and offshore.

Reserve Bank figures show net interest margins have risen from 2.14% to 2.31% in the last year. That increase of 17 basis points in a year doesn't sound like much, but when applied across NZ$321 billion of lending as at the end of September, that equates to 'extra' interest costs of NZ$545 million in a year. Or, if you looked at the other side of the book, that extra profit could have instead been used to increase term deposit interest payments by the equivalent of NZ$545 million a year.  That, by the way, would have generated extra tax revenues of around NZ$200 million.

The banks have managed to increase their net interest margins by sitting still. The shift from fixed mortgages to floating mortgages has lifted net interest margins and underlying profits substantially in the last two years. The net interest margin for banks has risen from 1.87% to 2.31% over that period, RBNZ figures show. If banks had shifted their interest rates by lowering floating mortgage rates and raising term deposit rates, or a combination of both, they would have increased the wealth of borrowers and savers by up to NZ$2.8 billion over those two years. That wealth was instead transferred to bank shareholders in Australia.

The lack of public debate and concern about this shift in wealth from New Zealand savers and borrowers to Australian shareholders is the second remarkable feature of this week's announcements. None of the major politicians have remarked on it. None of the major newspapers are noting it. Only the Greens have jumped on it. This is a very live debate in Australia, yet not here.

Interestingly, the Reserve Bank has started murmuring about banks needing to reduce their profit expectations, but it has not indicated any action. If may only hit the headlines if the banks decide to increase floating mortgage rates here next year by more than an increase in the Reserve Bank's Official Cash Rate. Some banks have suggested they may do this. National Australia Bank, which owns BNZ, did not pass on all of an Australian rate cut this week, sparking outrage across the Tasman.

Plenty could be done by the regulator and by customers. The Reserve Bank could, for good prudential reasons, tell banks to effectively limit their profits by holding more capital (particularly against property lending) and reducing their dividends. It could also force them to pass on higher term deposit rates by forcing them to fund their lending from local term deposit sources, rather than cheaper hot foreign money..

Customers could play their part by threatening to change banks. I managed to reduce the floating rate on my mortgage by 36 basis points by using a broker to threaten to move. There is a competitive market, but only if customers, regulators and politicians enforce it.


Annual Net Profit
in 2010/11
(NZ$ mln)

% growth
vs 2009/10














$ 2,778



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No – Bernard – we blame BP, Haliburton, Monsanto, JP Morgan, Goldman Sachs - etc. when we should name their management – hiding !  

People in corporations need to become accountable – not the corporation per se. So, lets talk about greedy/ criminal CEO’s - the people responsible for the damage they do to societies.

Why are these people allowed to hide behind the face of corporations - when they should be in jail ?

…and how much taxpayer money is wasted, covering mistakes of underperforming ministers in charge, but hiding behind the party face – billions  ?

Make ministers (politicians) accountable.

Get rid of parties - vote for people.

Get rid of parties - vote for people.  Well said Kunst 

While I may agree with Walter on that skudiv ...then those people have to find consensus and that's where it gets messy.

 Look at the grief independants have got in Auckland City over the years, untill little groups of independants became little parties to get things done ...and hey presto back to parties.

 No a Dictatorship is the only way...you know where you are when your being robbed, there is always  a comforting certainty in that......not to mention the occasional Banker being taken out and shot to give the people something to cheer about.


Party time on the 9th floor of the Beehive...bankers invited to the show...drinks all round...donations to the Party welcome...appointments for retiring pollies on offer....policy ideas invited..Bolly will serve the drinks....Bill is flipping the burgers.....Smiley will shake the hands..Public not welcome.

Get stuffed NZ.

Remind me , Bernard ....... which of these banks was it that went out into the street , and forced people at the point of a gun , to take out mortgages ...... where was the compulsion ?

.. across the nation , many citizens have behaved gullibly , others greedily , and the government just plain stupidly .......

And yet you blame the banks , Bernard ! .... they have behaved professionally , and created excellent profit for their shareholders .... bravo to them .

..... and a monster raspberry " pbsssssssssst " to you whom seek to find scape-goats for your own irresponsible behaviour .

Gosh Gummy...if you change 'bank' to 'pushers' ... 'mortgage' to 'drugs' and 'citizens' to 'users'...it all becomes clear.

Roger - Mafia bosses work very professionally too – they create excellent profit for their family members and poor aunty Dora in Calabria.

Sometimes - I ask my self if you are one of them. No I don't take you a 100% on that one.

Unlike the Mafia , Walter , the banks are operating under the laws of the land ....

.. the last time that I tootled into a branch of the ANZ  I was not offered drugs , prostitutes , nor admittance to an illegal gambling den .....

...... pity really , 'cos life is kinda slow in Rangiora ....

"banks are operating under the laws of the land"............laws of the land are operating for the banks!

See the picture change Gummy...the pretty girl morphs into a hag....

Bollard likely as not would want to clamp down with loan to value barriers at 75% but he is trapped into protecting the bubble with the cheap credit....and he knows the Beehive dances to the tune of the banks...so there will be no change to laws that protect the bank credit with mortgage status....QED the banks dominate the economy. We are being farmed.

The government has the power to adjust the rules , howsoever they see fit ... the banks have to suck it up , and operate accordingly ....

...... which leads me to wonder why Cunny , Goofy , Hickey or some other Labour loon hasn't proposed a " Super Profits Tax " upon the major trading banks !

That'll teach them to do honest , professional business here in NZ ..... we're no mugs , we won't put up with that sort of behaviour a moment longer ....

Roger - what about Key/ English the ones in government/ power - "your buddies" ?

What about them , Walter , the one's currently in power ?

.. GBH last voted for the Nats in 2005 . And won't be ticking their box in November . Wild Bill & JK are no buddies of mine .

If Jolly Kid stops focusing on the polls , and being Mr Popular ... and gets cracking on un-Cullenising the economy , then I'll vote for him . Not before .

...... and as Labour are promising to continue borrowing , to prop up idiotic vote buying welfare bribes of the past , I shan't vote for them either . We are fools to borrow for welfare schemes . We are not paying our way in the world , and are living beyond our means .

Yes "we" will Gummy...we will let our govt and the RBNZ( an unelected body)do the banks bidding because the banks own the farm....that is the point you refuse to grasp

..... the only point that I refuse to grasp hangs under a Thai lady-boys' skirt ...

Everything else is fair game .

Oh Gummy! You are funnnny.

GBH on "Super Profits Tax", how would you feel about an annual licence of $500,000 per bank ?

..... add three more " 0's " onto that figger , and we're talking serious dosh !

ooops, thats what I meant, $500 million, ($½ billion) per bank, per year.

I just got an email Roger from the PM of Italy saying: “Sono al cento per cento d’accordo con te !”

Il vostro primo ministro - Silvio Bernasconi

 Translated: I hundred percent agree what you are saying Mr. Roger Gummy – personally signed by th PM of Italy Silvio Bernasconi

prostitutions legal isn't it?


Good to point out that borrowers and savers have choices. They could have either not borrowed or saved elsewhere.

Unfortunately, these big four now have implied government guarantees after the retail deposit guarantee was put in place in late 2008. The guarantees have been withdrawn now and in theory they are being replaced with an open bank resolution system, but most believe these institutions are too big to fail and no PM (certainly not our current ex-banker) would let them fail.

That means they have an advantage and therefore we all face a moral hazard problem, which means the public through their politicians have a right to question their profitability.

The other point is that New Zealanders can no longer afford to buy homes without borrowing. These big four have 95% of the market. The alternatives just aren't there easily.



Let's get back to first principles Bernard : Why do Kiwis prefer to purchase a house , rather than to invest in productive businesses ?

... renting is an excellent option whilst houses are so highly priced .

And the current returns to business ( check out the low PE ratios of common stocks around the world's bourses ) are superb . Dividend yields far exceed the returns from rental housing .

Houses ? ... Tch tch , so " 2000's " of you Bernard , this is a new decade .

I agree with you on that one Roger. I do not understand why people financially expose them self with mortgages. Now in difficult times we all should learn much faster and live in modesty to be in control of our finances. Why not live mortgage free ?

Why do we have in NZ soo much debt - a terrible culture ?? No wonder, why "the sharks" are growing - hungry for more.

Walter : We've borrowed a hundred billion $ , give or take , to fund a property bubble . All that munny charging into an unproductive asset .

..... imagine some % of that munny going into business , R&D , research , innovation , infrastructure .

And all National & Labour can come up with is to borrow even more than we currently owe , to make welfare payments , rebates , and entitlements to one another .

Absolutely agree Roger. What I experienced here in NZ many “business people” don’t invest their profits back into their business and live on a modest life style for 5- 10 years – but buy a boat, a flashy car, TV's, spend holiday and of course mortgage them selves to the neck with a house.

Roger - megalomaniac economic plans from the government and failed monetary reforms will push the NZmiddle class into poverty and the super rich abroad in their super yachts.

"the super rich abroad in their super yachts."

I think you miss that this is a global event so the super rich may have problems in getting a port that will take them in without collecting a pound of flesh in taxes.......


Ppl have done it because for 40 odd years such a decision made sense.....if you has started in say 1977 and sold in 2007 you would be well off.....  The 1987 crash was due to greed and stupidity...but that could have been fixed with regulations that were proposed....they got canned as the "big boys" didnt like them.....the end result is the NZX is pretty much an empty shell.....it was their /our own fault IMHO. Ditto the old NZ superanuation fund that got canned...it would be worth a lot today and save our ass......somebody should trundle over and pee on a few dead polies headstones....




I don't understand Steven, the financial system as you know from reading Steve Keen is basically rigged to explode every 70 odd years with a major 'credit event', as well as minor 'credit events' and some how borrowers and investors are to blame at least as much as or rather than economists, bankers and politicians for failing to understand this?

Seems to me many people are saying it would be 'better' if NZers savings had been wiped out in a recent share market collapse rather than a recent property collapse. Isn't the problem that the collapse happens, and it's very large and global and unpredictable. Not which sector it happens to occur in.


You have a choice, watch house prices rise up to the stratosphere, while your savings decline every year.  Or you can borrow now.  Inflation is the killer, loose lending is the weapon, and savers are the victim.  Totally legal extortion of the public to blindly play monopoly.

You have a good point Gummy don't blame the players, the game is rigged from the start.  Making profit from money created out of thin air is legal, in fact it is illeagle to refuse to accept it.  How much profit can you make, when you have a monopoly over an infinite resource that everyone needs, that is created from thin air?

Responsible would be saving to buy a house, but the monetary system has made this impossible. 

After you win at monopoly it all goes back in the box.  Time for a new game.

The problem is 2 fold...

1) Houses are already in the stratosphere and like a plane flying too high can stall and fall a long way....even to the ground from a great height now looks possible.....

2) Account for risk of deflation/depression....this will cause 1)

The Q is when will it really start and how quick and how far it can fall.....Taking the last, the worst case that has been suggested is no credit is available, in this situation you buy the house for the 10 to 20% deposit you have saved.....so those today on a 90~95% mortgage are effectively toast for the rest of thier lives as this is a 20 to 30 year event.....well their only option and quickest escape is to declare bankruptcy...I think you get out in 7....though I wonder if debtors prisons will make a come back.....I suspect so.....or the younger ones get "encouraged" to be canon fodder to clear the debt that way.....

The minimum I suspect is to get back to the 3 to1 ratio which means a minimum of a 50% loss......and with overshoot I cant see it being only 50%....so 60 to 75% loss, this seems most probable.

How long? the GD took 3 years to reach bottom but businesses were in a bad way, right now the mega corps are cash rich......so double that, say 6 years at 10% per year....hence my 60% as the mean guess.

When? well they seem to have kept it going 18months or so.....but right now the EU looks so bad I cant see 18 weeks....maybe not even 18 days......xmas could bring interesting presents with it....

Saving for a house......I think from memoery some countries think differently in terms of saving for a house...ie the house is family owned and shared and passes through generations.....I suspect it will be that way here......unles the govn has death taxes so huge that that isnt possible.....






Gummy i have to agree even though i dislike banks. And i'd rather see our banks strong and secure and profitable

Too true Gummy.

An unfortunate element of human nature is our propensity to blame others for our mistake and like comformity (tall poppy syndrome) is especially rife in our culture. 


Has the RB been asked to be quiet until after a certain Election?

If Bollard has not had that message he should be getting a bit NOISIER.

Hear that Alan?

Quiet Brushy...the public will hear you.

The lack of public debate and concern about this shift in wealth from New Zealand savers and borrowers to Australian shareholders

Well, Bernard, why don’t you go out and buy some shares in aforementioned banks and then you’ll be able to moan and bitch about the lack of concern in the shift in wealth from New Zealand savers and borrowers to New Zealand shareholders.

David B,

Are you saying that customers don't have a right to question whether they're getting a good deal and exercise some choices?

Or that a government (which has given guarantees in the past and still guarantees NZ$9 billion of wholesale debt issued by ANZ, BNZ and Westpac) have no right to question those profits?



Of course, those are legitimate questions. The profitability of any publically owned business, including the banks, can and should be questioned on a regular basis. But I don't think you can blame the Australians for running a successful business. That is going too far in my view. It's a shame there aren't a few more New Zealand companies like that. I mean what are they supposed to do? Run the banks into the ground? Have you thought, Bernard, that if it were not for the Australians running our banks (i.e., if New Zealanders had been running our banks) then the outcome of the GFC on this country might have been very different to what it was?  Given the penchant for New Zealanders to make a hash of running financial institutions, I wonder how many of our banks would have failed over the last three years and what that would have done additionally to the country given all the struggles we have faced in recent times.

Where I do sharply part company with you is on the notion that this is a wealth transfer to Australian shareholders. Why just Australians? There are New Zealand shareholders as well you know. I'm one of them, are you?

As an addendum to that, I also support Kiwibank. I have a Kiwibank credit card and I have term deposits with them.  I am and have been a long term supporter of kiwibank, and I think that it is in the national interests of New Zealand that there should be a New Zealand owned bank. And I have put my business where my mouth is. I wonder how many others around here have done that?

Of course Bernard the banks are doing exactly what one would expect of them, very effectively in fact, and in the case of the NZ banks without taking undue risks. The problem is and has always been that the banks are allowed to create credit, after that the results are baked in and will always reflect what we see now. You can't regulate to prevent bubbles and it will not be possible to prevent massive pay for excessive risk with the banking system the way it is today.



Yes indeed Nic, banks in New Zealand do not indeed take undue risks, because unlike in the United States, there is a seperation between retail and investment banking. So the retail banks leave the risk to to finance company sector, whilst raking profits of them by offering lines of credit, and when the economic winds turn, they drop them like a hot potato, leaving Mum and Pop investors to hold the bag.


"While some companies such as Geneva Finance have solid agreements with banks over the terms and rates of that credit, others will have less-reliable arrangements.

Given the recent squeeze on short-term funding for banks, those finance companies that rely on lines of credit from banks are vulnerable to increased costs.

Furthermore, it is conceivable that the banks, which generally tend to be fair-weather friends to borrowers, may choose to withdraw the facilities altogether as they seek to reduce their own risk profile."


That is very interesting, I was under the impression there was basically no difference between a finance company and a bank in NZ, except that they were usually given less access to some guarantees which Banks have, and they don't process deposits.

"However this depends on the jurisdiction, as in some jurisdictions, such as New Zealand, any company can do the business of banking, and there are no banking licenses issued."


I suspect that the truth is somewhere between the two, but it certainly shows the influence of the US Glass-Stegal legislation and why removing it was such a huge mistake.

It would hardly be a surprise that the Bank did drop them during a crisis of course. I don't actually blame the banks for doing this myself, because to keep lending the same way in prevailing economic conditions would be highly negligent, probably criminal. This is entirely the fault of the financial system we have.

 I don't myself put that much faith on re-regulation (including things like bonus taxes). People should certainly be prosecuted where they have broken existing laws. But in my opinion the only legitimate way for a national money supply to operate is for it to be entirely created by a democratic institution and new money spent by another independent democratic institution. Having the creation and first use of new money in the same place can never by regulated well enough to prevent it being abused.

Laws like Glass-Stegall were very far sighted however there were still causes for the US default in 1972, and other financial crisis since. There were similar reasons for the Muldoon Government problems as well. Thinking about the Muldoon-Lange (Douglas)-Boldger (Richardson) policies it really seems apparent that NZ was under economic attack from the IMF during this whole period, hence the sharp reversals and changes in both main parties economic policies.


If we need an example of the folly of selling off our assets overseas, the $2.8 B bank profit flowing to Austraila each year should be sufficient.  Frankly if we are so stupid that we cant see that we deserve the consequences.  Don't threaten to remove your buisness from these banks, just do it.  If this profit accrued in Kiwibank, a large part of the Governments future deficit problem would be solved.  No extra taxes, cuts, nothing.

A 100% reserve banking system would also have a similar effect, and many other benefits. A key benefit being what ever happens overseas, stays overseas.




You are the direct beneficiary of their profit Bernard, Interest.co.nz are full of bank advertisements - some are for cheap mortgages.

Fsssssssssssk , boing ........ ..Bulls-eye !

...... superb observation , Chairperson Moa .... ha ha !!!

Chairman Moa - that is because of Bernard's poor aunty Dora in Calabria connetion. ;-)

See 11.11. - 2:15pm

The Reserve Bank touched on this in its June 2011 Bulletin.  NZ banks ranked first (bar none) of the 22 OECD countries surveyed in terms of return on equity (albeit based on 2002-2007 figures, so a bit out of date).  The authors concluded that the NZ banking sector earns a return on equity about 2% higher than the typical NZX 50 company, but it's not the most profitable sector in NZ.  The rest of the article is a list of excuses for why it's hard to measure and compare bank profitablity in NZ and overseas. 

What was David Tripe going on about this week, about banks not being very profitable because they are making less than 1% return on assets? What assets does a bank have apart from some bricks and mortar and a bit of working capital? The money they loan out isn't an asset....


Go find a Year 10 Ecomonic's or Accounting student and they will expain what an Ässet" is.

Simply if someone own's you something its an asset and if you owe something its a liability.

Might pay to read a set of Banks financial accounts or revert to first suggestion.

Also banks now own very little property as their capial is better used elsewhere in their businesses.

If Kiwibank was actually running a professional operation, instead of employing barely competent monkeys, then they would easily take a far greater share of the market and create some real competition.

The absolute abysmal performance by Kiwibank, to judge who to lend money to and how to get the paperwork done is now being shown by their low profits.

I will give examples: a family member applied to Kiwibank for a modest mortgage on a property producing a good income (they had an exceptional work record, with enormous equity and other mortgage free properies).  Kiwibank required a huge amount of unnecessary paperwork, made them jump through hoops and couldn't even approve the finance in 10 working days (so needed an extension, this was all despite the borrower being an existing customer who previously had a small mortgage with them that they'd paid off) then when it came to settle Kiwibank were late providing the lawyer the mortgage documents.  Two days after settlement still no documents, so a call the CEOs office to ask what the hell was going on, was needed to get them there in a few hours so that the contract didn't get cancelled (Kiwibank paid the penalty interest), but still not a good look.  My lawyer also told me they had had terrible problems with Kiwibank getting accurate documents on time.

Second example, I know they've had a fair few mortgagee sales, but one in particular where there was a fire in a house, which according to the sales agent had no insurance and the bank took a 40% loss on the sale price!  Obviously their paperwork isn't in check, surely it's not hard to ensure that all properties have current insurance!

No surprise really.  What do Politicians know about running businesses?


No surprises here.............

Know a number of people who have left KB based on very poor service.

They can't attract good staff from other banks (know 3 staff who went to them and bailed at first opportunity due to proceeses and lack of discretion) and frontline staff have enough to do dealing with stamps and car registration!!!!!!!!!!!

I agree Chris, they are their own worst enemies. We shifted our mortgage and accounts to Kiwibank with patriotic fervour and we had heaps of trouble with them. All loans, credit cards and mortgages need to go back to their head office for approval, which can take days. We had a lot of trouble too shifting over bank cheques and cleared funds from our lawyer. They didn't clear them straight away as other banks do. There seemed to be an extra fee for anything we wanted to do too- not negotiable as head office decides everything. I can only say in their defence that 'they mean well'!

Strange but over 8 years ive had good service from kiwibank....better than my previous bank ASB,,,,or the one before that National who really couldnt be bothered.....

Fees, sure if you want things done you can end up paying....but my experience is its cheaper than having a monthly fee extracted......ASB used to be $10 to $20 a month, a bad month now  with kiwibank is $4......


New Zealnd banks are amazingly profitable.....

Wrong choice of words Bernard....

New Zealand banks amazingly POWERFUL.

Much more accurate don't you think.!

Just another symptom of NZ'ers who have gone completely insane over last decade borrowing to their eyeballs in the hope of making 'free' money in property.

The banks love it, the PI's take on all the risk, while the banks get risk free profits.

Problem is we have now hit our 'borrowing limit' seen by they fact that we are getting downgraded by fitch and s&p. 

Banks realise they can not grow their lending as much as they used to, so they make sure their margins are fatter so they can get the most profit from the big pile of mortgages they already have. Once again, banks win (funny how they seem to be so good at the whole money thing, considering thats what their business is about...), and the less money smart property owners get screwed as they pay 6%+ on an asset that returns nill profit year after year.

I don't expect that the following explains all, but  I suggest that it is at least indicative of a culture and some of the reasons for such large increases in profits by the trading banks.

It is interesting to note that of the four banks listed, the three banks with the largest increases are KiwiSaver providers; BNZ which had a lesser increase is not directly involved as a provider. 

I have a KiwiSaver account with ASB (which is secondary to my main superannuation savings). Given the current volitility of the sharemarket and the closeness to my retirement, some months ago I transferred from a growth fund to the ASB "Bank Deposit". This has proved to the correct move in that I have avoided the current decline in the international shaemarket and that account, but I remain very dissatisfied with the return on ASB's "Bank Deposit" fund.

I have found the term "Bank Deposit" misleading. ASB's return on this is the Wholesale Rate (i.e. inter bank rate) and has returned only 2.68% in the past year (their figure). I suspect that most conservative savers would expect an account that is "Bank Deposit" with a reasonable degree of tenure would be treated at least as well as their Fast Saver Account (currently returning 3.15% without fees) or to be reasonably expected to be similar as a "Bank Term Deposit" five year term rate with 5.5%. 

In short, I while having avoided a sharemarket downturn I still feel ripped off.

Given that ASB has $182 million in their "Bank Deposit" fund and $1.108 billion in their default conservative account, then it is not surprising that they are making such a killing as a 2% margin on this sum is significant.

Without readily available and transparent information I can only fear that their growth accounts equally favour ASB.    

I note that the funds aligned to all the trading banks tend to have the largest deposit in each of the differentaccount types.

I stand to be corrected and would welcome ASB to do so.   


Look on the bright side :) Very profitable banks are less likely to fail.

How much did NAB pay for BNZ in 1992?  What would that cost be in 2011 dollars? 

$380M in '92 bailout is about $590M now.  BNZ net profit this year $670M? 

How much of BNZ did we (taxpayers) own for our $380M and what would be our dividends now? 


Umm, of course they are amazingly profitable. They are owed 97% of the money supply. Creating money is an incredibly profitable business model.



So very kind of you , Iain , thankyou . ... But GBH can only dream of joining the financial services industry . The simple swapping of one consonant , a " B " for a " W " , and I could become a banker ...

... oh how I dream , .. to join that august body whom provide such an invaluable service to modern society .

...... I think that we can all agree , that howeversomuch that bankers are currently renumerated , it is not nearly enough ... double the bonuses say I , .. nay , treble them ......

Your humble " pocket-billiards " boy , Gummy .


What u never hear of in the Media is how our Money Supply grows.


This is not fiction or Fantasy...

Banks and the Banking system have an almost unbelievable and amazing EDGE when it comes to....  "making money".

They REALLY can create it out of thin air...  This seems so hard to believe... that even u don't write about it..!!!!!!!

For example. in June 2010 M3 money was $214 Billion and in Oct 2011 it is now $229 Billion.....  That is a growth of $15 Billion .!!!!!!

I want to SCREAM this out as loud as I can......  15 Billion Dollars

There is NO COST TO THIS CREDIT...  It was created out of thin air and then lent out ....at say 5%

5% of $15 billion is $750 Million dollars in NETT INCOME per yr to the "Banking System".

Do u get it...??????  

I'm not sure if it is this simplistic... I'm just trying to get the point across. ( ie. I don't know if the nett profit from this new credit is actually $750 million )

AND.... I'll just add that there are ONLY 2 ways that the Money supply can expand...  One is thru the creation of Credit by Banks and the other is thru the Reserve Bank expanding its' balance sheet.


If u can accept the above....  then it raises the question :...  Does the Banking system have a "Social Responsibility" to NZ  because of its' unique ability to create "Money"...?????

Should the Banking System be regulated to a different set of "Criteria" than other private enterprises...?????

Cheers  Roelof






If they didnt how would we pay the interest?  Fortunately the government is borrowing on our behalf to fill the void.

Isn't that increase in M3 the net capital inflow minus the current account deficit? Surely most of it is the offshore funding portion of the fiscal deficit?  

FYI from a reader via email



First and foremost thank you for taking the time to write in the Herald each week.  I find the financial literacy rates of our country to be incredibly low and the more varied viewpoints that people can read (as opposed to just taking everything they hear as gospel) the better - lord only knows how many people would have poured money into finance companies had they realised they were essentially shooting craps over a few extra basis points of interest.


With regards to your last article regarding the profit stripping carried on by the Australian banks, this is a topic that is quite close to my heart.  I previously worked in the banking sector in London and saw the grubby inside of the industry working in the City.  I saw the crash coming and left in 2007 and will never work for an organisation such as these again.  I am completely dismayed by the banking sector and the behavior of those within it.  Never before has so much been plundered from so many by so few.


Your article refers to "net interest margins" of banks, yet it does not actually explain how this occurs.  I think if you could somehow articulate this point to people they might start to act.  At the heart of the matter lies the concept of fractional reserve banking; completely not understood by the general population.  I have referred all my friends and family to watch "Money as Debt" on YouTube, all have switched their accounts to Kiwibank or TSB after seeing this.  In the end New Zealand's money supply is being controlled by Australian banks, who care nothing about the economy (refer the loan size against the Crafer Farms).  Sure, we were the masters of our own misfortune by over-leveraging, but surely the banks are due their haircuts as well.


I have done a lot of reading about the Bank of North Dakota.  All state agencies must bank with it, it exists purely for the economic benefit of the state, all profits are retained within the State (and interestingly North Dakota is the only state of America not to enter recession).  Surely with Kiwibank we have the answer to our problems - are we that stupid that we can't see this?  Perhaps we are, maybe that's why the Government still banks with Westpac and have continually missed the opportunity to develop the Business Banking side of the organisation.


With kind regards




Many thanks.
People are beginning to educate themselves all over the world about banking.
Aiming to help.

The Collapse of Our Corrupt, Predatory, Pathological Financial System Is Necessary and Positive 

We are being throttled by the Big Lie: we're told that if the predatory financial system implodes, we'll all be ruined. The opposite is true: the only way to save our economy is to let the corrupt, pathological and flawed financial system implode.

I was recently challenged by a contributor to write something positive, and so I decided to write about the single most positive outcome of the current financial crisis in Europe: the complete collapse of the corrupt, predatory, pathological global banking sector and its dealers, the central banks. Exploring why this is so reveals the insurmountable internal conflicts in our current financial system, and also illuminates the systemic political propaganda which is deployed daily to prop up a parasitic, corrupting, pathologically destructive financial system.


Be a Banker....that's the thing to be....!

All the power of a Tax Collector

All the style of a Gucci

All the staus of a Celebrity

All the secrecy of a Freemason 

All the thrill of a  Wall St. Gambler

All the treachery of a Spy

All the free lunches of a Politician

And best of all.............No Risk it's other peoples money.


Bernard : The next opportunity you have to interview Labour's shadow Minister of Finance , Mr. David Cunliffe , could you ask him to confirm or to deny the rumour that under a Labour Government a " super-profits " tax will be imposed upon the retail trading banks operating in New Zealand .

Thanks .

I would expect he'll get a shadow of an answer to that one GBH.......but you've given me an idea.

 How bout when Kun Li's on the chair he's cast in shadow in keeping with his epithet...sort of add to the drama of it all.

So tell me what would have happened Bernard if one or more of our big banks failed during the GFC or since...  what would have happened to our economy, our interest rates, our unemployment rates, etc, etc.  Surely having some of the largest companies in the country returning good profits, dividends for their shareholders, a substantial number of jobs, and not to mention large amounts of taxes for the government is a better option.

Yes I agree that the level of profits are getting ridiculous, after all I have a mortgage too like some many other NZers.  Perhaps it is time for one of the big four to take a REAL market leading role and drop floating rates by 1%, perhaps that would then stick a bit more petrol in the tank and make our lives a little bit more easier!