Kent Duston: Banking Reform Coalition spokesperson on the state of the Government's banking inquiry

The Government says it will act on all 19 recommendations from Parliament’s banking inquiry - and it's committed to increasing scrutiny around the banking sector.

This comes as Westpac and ANZ report significant increases in profit, prompting concern from experts.

Kent Duston from the Banking Reform Coalition says the proposed changes make good steps forward, but it's unclear how much of a difference they will make.

"I think the big issue here is that the banks simply don't care. Whatever Parliament says - we're on the back of an inquiry from the Commerce Commission, another inquiry from Parliament from the select committee...whatever it is Parliament's saying, clearly the banks aren't listening."

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Episode Transcript

Speaker 1 (00:00):
Now, if you've been looking at the huge profits the
big banks Westpac and A and Z have been reporting
in the last couple of weeks and you've had raised eyebrows,
you may be pleased to know the Government has agreed
to act on all nineteen recommendations from Parliament's recent banking inquiry.
But you may be disappointed to know it's all pretty
low level stuff. Ken Dustin from the Banking Reform Coalition
is with us high Kent Evening Heather, it's is actually

(00:22):
going to make a difference.

Speaker 2 (00:24):
Well, look, these aren't bad recommendations. In full marks to
the Government for adopting everything that's come out of the
Select Committee. I mean it's a good step, right, it's
not going to hurt. But you know, as you said
in your intro, I think the big issue here is
that the banks simply don't care whatever Parliament says. You know,
we've got we're on the back of an inquiry from

(00:44):
the Commerce Commission, another inquiry from Parliament from the Select Committee,
and you hear is Westpac cranking its profits up thirteen
percent and A and Z cranking them up a full
twenty one percent. So whatever it is that Parliament's saying,
I mean, clearly their banks aren't listening.

Speaker 1 (01:00):
Now is there What of the recommendations which do you
think may be the most effective in doing something here?

Speaker 2 (01:08):
Well, as I said, none of them are bad, but
what they're going to need to be effective is legislative teeth.
So the thing that we're really keen on is the
changes that they're making to payments in Z and in
payments in Z really is the gateway to open banking.
It's the reason that we don't have, for instance, real
time transactions moving between banks and New Zealand the same

(01:28):
way that practically every other civilized country in the OECD does.
And so the recommendation is that well, payments in Z
needs to reform its governance. It's not a bad step,
but fundamentally that's going to have to get backed up
with legislation, and probably sooner rather than later. And that
means taking the power to block open banking off the

(01:49):
banks in legislating for it, exactly the same way as
we legislated for the breakup of Telecom New Zealand ten
years ago.

Speaker 1 (01:55):
I think that open banking is that much of a
game changer, because last I saw in Australia and to
be fair, it's been a while now, but last I
saw in Australia it really hasn't changed the game much.

Speaker 2 (02:04):
Well, the big issue is competition, or the complete lack thereof.
You know, we've got the major four banks, you know,
depending on which market you look at, round about ninety
percent market share, and the only way we can change
that is by getting new banks in. And by new banks,
we don't mean those old traditional high street banks. What
we mean are these nimble FinTechs who can start offering

(02:25):
those kind of products. But without open banking, it's all
dead in the water.

Speaker 1 (02:29):
Yeah, okay, so how much of a game changer is
open banking?

Speaker 2 (02:32):
Open banking can be a huge game changer, and there
are some really nimble FinTechs out there who are poised
to do things. But as it stands, without legislation, without
Parliament saying yeah, we want this thing, we want to
get going on it really quickly, and we want to
put some hard deadlines for the banks to step up,
then really, you know, we'll still be having this conversation

(02:53):
in five years time.

Speaker 1 (02:53):
Okay, So if what I'm feeling right now is disappointment,
that would be that would be a fair reaction.

Speaker 2 (02:58):
I think just about everybody New Zealand is going to
be disappointed in the sense that they're looking at the
amount of money that's being taken offshore by the Australian
owned banks in the middle of the deepest procession we've
had in the generation, and thinking what you know. In
A and Z's case, profits up twenty one percent, But
they didn't get there by being twenty one percent better
at what they do, or twenty one percent more customers,

(03:20):
or twenty one percent more innovative. They've simply stuck their
hands in New Zealander's pockets longer and deeper than the
year before. And I think everyone in New Zealand would
be looking at and saying, when is this going to end?

Speaker 1 (03:31):
Okay, Ken, if you could do one thing to fix banking,
what would it be.

Speaker 2 (03:36):
I'd break up A in Z. To be perfectly honest,
we've gotat legislative exactly the same way as we separated.

Speaker 1 (03:45):
Did you divide out from what?

Speaker 2 (03:47):
Well, We'd simply say that no bank can be more
than ten percent of the market and break it up
into its bits and allow those pieces to be invested in,
preferably by New Zealander. So that the profits stay on
shore rather than going offshore. And instead of having two
large banks, we could end up with maybe seven or
eight or nine much smaller banks who would genuinely, genuinely

(04:10):
compete with one another.

Speaker 1 (04:12):
When you say that this is a good idea, have
you weighed up the shock that it would create for investors.

Speaker 2 (04:19):
Hither, You're entirely right. It would be a shock for investors.
But here's the thing, it will be a shot for
overseas investors because at the moment too much of our
banking industries is owned by the Australians. What we need
is to bring that investment back on shore. We have
the key. We saver funds, for instance, are dying to
invest in high quality. Yes, it's like the banks, but

(04:39):
because of the structure of our sector, they're pretty much
locked out of it. So New Zealanders could be the
ones benefiting from our banking sector rather than all the
money going to Australia.

Speaker 1 (04:48):
Hey, thank you very much. Ken does always appreciate it.
Kent Dustin, who is from the Banking Reform Coalition.

Speaker 2 (04:54):
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