Cooperative Business NZ Supports Calls To Strengthen Competition In The Banking Sector

As the Select Committee Inquiry into Banking Competition hearings draw to a close for 2024, Cooperative Business NZ, the voice for the country’s cooperatives and mutuals, is backing calls to create a fairer banking environment for smaller and specialist banks.

These banks are asking for changes that will help them compete with the large Australian-owned banks and give Kiwis more choices, CBNZ Chief Executive Saya Wahrlich says.

“In particular, mutual banks such as SBS Bank and those with a cooperative ethos, play a unique role in New Zealand, often helping underserved communities or communities with specific needs, such as farmers and food producers, and offering alternatives to big banks. Their focus on people, not profits, means the benefits are returned to members, stay in New Zealand and directly support local communities,” Ms Wahrlich says.

“Right now, capital risk settings disproportionately favour the large, Australian-owned banks, allowing them to hold less capital relative to their size and systemic risk. Plus, smaller banks face disproportionately high compliance costs relative to their scale, further entrenching the dominance of larger banks.”

More standardised credit risk methodologies and tiered capital requirements would address the capital risk settings imbalance, enabling smaller banks to compete more effectively. Regulatory reforms should account for disparities in compliance costs to create a fairer and more accessible banking environment, Ms Wahrlich says.

“The large banks' access to lower-cost funding is amplified by their scale. Measures to equalise funding opportunities over and above recapitalising Kiwibank to act as a ‘maverick’ would support other challenger banks in providing more competitive offerings.”

As member-owned entities, cooperatives and mutuals look ahead to a sustainable, inter generational future, as evidenced by their enduring natures. Strengthening their ability to compete will empower these banks to drive meaningful change in the sector and better serve all New Zealanders.

Cooperative Business NZ joins its members in urging policymakers to prioritise these changes to ensure a more competitive, equitable, and resilient banking sector for the benefit of consumers and the New Zealand economy.

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