“Before the Government embarks on another round of election year populism by attacking the private sector, it should ask how its last market study’s working out,” says ACT’s Associate Finance spokesperson Damien Smith.

“Just as Labour publicly flogged the petrol companies in the election year of 2020, now it’s the banks’ turn to get a dose of election year populism.

“What will it achieve? Almost certainly nothing except more red tape and higher borrowing costs for New Zealanders.

“ACT predicted that an invasive CommComm investigation and new regulations wouldn’t make a difference to petrol companies’ profit margins, and we were right.

“MBIE data shows that weekly average importer margins on regular and premium petrol haven’t budged since 2018 and the margin on diesel has increased.

“This isn’t about profitability or competition because the data shows bank profitability is in the middle of the pack compared to leading NZX companies. We already have a very competitive banking sector with more than a dozen retail banks.

“Helen Clark and Jim Anderton created a government-owned bank to improve competition and reduce profits. If the last Labour Government literally creating a new bank hasn’t achieved its purpose, it’s difficult to see what this Labour Government possibly do.

“Government regulation has a major influence on how banks operate. If Government taxes banks more, they will have to get the money from their customers. If Government regulates banks more, they will have to pass compliance costs on to their customers. If Government regulations reduce competition in banking, customers will pay more for a limited range of options.

“The banks are regulated by the Reserve Bank, the Commerce Commission, the Financial Markets Authority, and MBIE. Banks with Australian parent companies also have the Australian Prudential Regulation Authority (APRA) keeping an eye on them on the other side of the ditch.

“Banking is supposed to be about managing risk, but too often it is about compliance.

“The Government could be asking, for each regulation the financial services sector faces:

  • What is this rule for and who does it protect from what? It should start with the CCCFA.
  • What does it cost in terms of compliance activity, and does that cost prevent new competitors entering the market? There might be a reason why we have KFC and McDonalds but no U.S. bank in the New Zealand retail space.
  • What benefits does this rule bring, and is there a better way to deliver them, such as self-regulation, or more competition?
  • Should this rule continue or be scrapped entirely?

“If the Government wants to be sure New Zealand customers are getting the best deal from their banks, it should instead be making sure regulation isn’t having a negative influence on Kiwis’ back pockets.”

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