“It would be shameful for the Labour-dominated Finance and Expenditure Committee to block an inquiry into the Labour Government’s regulation of the banking sector,” says ACT Leader David Seymour.

“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. None of this is complicated, but Labour will do their best to make it so.

“The most helpful think the select committee could do is ask whether being regulated by the Reserve Bank, Commerce Commission, Financial Markets Authority, and MBIE is helping. Don’t forget 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. How risky is this loan, what sort of interest rate does it need to make it balance? Instead, too often it is all about compliance. Does this activity fit with the rules.

“The Finance and Expenditure Committee should be asking, for each regulation the financial services sector faces:

• What is this rule for and who does it protect from what? starting 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?

“The answer to high bank profits is more competition. If the profits really are too high, more competitors will enter to compete them away. A new tax will simply put costs onto banks’ customers, because ultimately all their money comes from their customers.

“If the Government wants to be sure New Zealand customers are getting the best deal from their banks, then they need to make sure that regulation isn’t having a negative influence on Kiwis’ back pockets.”

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