In recent years, the New Zealand government has raised concerns about the dominance and practices of the big four Australian-owned banks operating in the country. These banks—ANZ, Westpac, ASB, and BNZ—control about 90% of the market. The government and various consumer advocacy groups have accused these banks of overcharging customers and operating in an uncompetitive manner.
The New Zealand Commerce Commission recently published a report highlighting the lack of competition in the banking sector making the accusation they are running a Oligopoly . The report described the market behavior of the big four banks as resembling a “cosy pillow fight,” where profit margins are prioritized over customer service and innovation. Finance Minister Nicola Willis stated that the findings confirmed long-held suspicions about the uncompetitive nature of the sector.
One of the key issues identified in the report is the high profitability of these banks compared to their international peers. The banks have been accused of making excessive profits at the expense of everyday New Zealanders, especially during times of economic hardship. For instance, ANZ New Zealand reported a return on equity of around 12%, which it claims is fair and balanced. However, critics argue that this level of profitability indicates a lack of genuine competition.
In response to the report, the New Zealand government has pledged to implement all 14 recommendations made by the Commerce Commission to inject genuine competition into the market. This includes investigating options for raising new capital for Kiwibank from pension and investment funds and everyday New Zealanders. The government aims to make Kiwibank a “maverick” that can exert real competitive pressure on the big four banks.
The issue of overcharging is not new. In 2018, the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry in Australia revealed that ANZ had overcharged nearly 500,000 home loan customers due to processing issues. This led to the bank overcharging customers by approximately $90 million. Such historical instances have fueled the current concerns in New Zealand.
The high fees and interest rates charged by these banks have a significant impact on New Zealand consumers. Many Kiwis struggle with high living costs, and the additional burden of excessive banking fees exacerbates their financial challenges. The lack of competition means that consumers have limited options and are often forced to accept the terms set by the big four banks.
The New Zealand government is committed to disrupting the oligopoly and fostering a more competitive banking environment. By strengthening Kiwibank and implementing open banking, the government hopes to provide consumers with more options and better services. However, it remains to be seen how quickly these changes will take effect and whether they will be sufficient to address the deep-rooted issues in the sector.
The dominance of Australian-owned banks in New Zealand has led to concerns about overcharging and a lack of competition. The government’s recent actions and the Commerce Commission’s report highlight the need for significant changes in the banking sector. By promoting competition and supporting alternative banking options like Kiwibank, New Zealand aims to create a fairer and more competitive market for its consumers.
