NZ First lies in wait for the Aussie banks
By Richard Harman (author)
Finance Minister Grant Robertson had to call for calm yesterday as the row over the Reserve Bank’s capital funding requirements for banks raised passions among the public and among some MPs.
Statements from the ANZ suggesting they would pull out of New Zealand if the Reserve Bank's proposal to require them to hold another $2 billion of capital has set off a whole series of responses.
POLITIK understands that NZ First is watching the situation closely and is ready to revive its long-standing call for an inquiry into banking in New Zealand.
NZ First Leader Winston Peters told TVOne’s “Q+A” last week that there had been countless inquiries into the banks launched out of Canberra into their own banks but “meanwhile in my country, not one.”
“I have watched, over the years, while as though somehow Ned Kelly’s misbehaving himself in Australia, but not in New Zealand," he said.
“That is the height of naivety.”
Peters said he still believed we needed an inquiry and he also called for the resignation of ANZ chair, John Key, a call that POLITIK understands NZ First plans to continue making.
Robertson's statement said all New Zealanders wanted a safe banking sector that supported our economy.
“Safe and efficient banks are important for New Zealand families, our communities and our businesses,” he said.
The Bank’s Deputy Governor, Geoff Bascand, told the Otago Foreign Policy School at the weekend that one factor to be considered about the Australian banks operating in New Zealand was that they were much more dominant here than in Australia.
“And the risks are a bit different,” he said.
“New Zealand has recessions more often than Australia; we are more exposed in terms of trade shocks.
“So we are going a little safer (than Australia, but that's because we think the risks are higher.”
Nevertheless, the Australian banks in New Zealand are very profitable, a point that Robertson highlighted.
“Our banks are generally safe and secure, and indeed very profitable, so much so that the Australian owners of some of them are among the most profitable banks in the world.
“But we must always be looking at whether there are ways to do better in terms of security and safety and to keep the worst from happening.”
Bascand said the Reserve Bank had fought very hard to have the New Zealand operations of the Australian banks incorporated here.
“We are still working on requiring that they have got systems in place in New Zealand that if the parent failed and didn; 't want to support the bank in New Zealand we could still run the bank here.
"That is a controversial policy, but we think an important one.”
That ability to run the banks here as standalone operations, with a separate capital structure to their Australian parents is one of the reasons the Reserve Bank is seeking the additional capital.
Robertson’s statement emphasised the independence of the bank and its role as the banking regulator.
“The review of bank capital is being undertaken by the Reserve Bank as the independent regulator," he said.
“ That independence is legislated through the Reserve Bank Act. “
“The goal of this exercise by the Reserve Bank is to ensure New Zealand has a safe and efficient banking system, which gives support and confidence to all New Zealanders.”
And then he added a section which looks very much like it is addressed to the ANZ Bank and its CEO’s threat to pull out of New Zealand if the Reserve Bank persists with the capital requirement.
“This requires a mature debate about the settings underpinning the banking system.
“I want to remind all parties that we are still in a consultation process.
“I am calling on all interested participants to listen to and work with each other constructively as this work is carried out.
“The aim is to strike a balance which ensures a safe and efficient banking system that New Zealanders need and deserve.”
Robertson might need to address those comments to his NZ First coalition partner as well.
NZ First have long found the banks an easy target. It would be surprising if they hung back now.