Nicola Willis: Finance Minister on the changes needed in the banking sector and rural banking

The Finance Minister says change needs to happen in our banking sector. 

The Government's requested an inquiry into banking competition, particularly in rural banking. 

Nicola Willis says we owe this inquiry to our rural communities, who are vital for the recovery of our economy. 

She told Mike Hosking that she's open to anything, including bringing banks into line and changing legislation to guide the Reserve Bank to do things differently. 

Willis says this issue is at the heart of whether businesses can innovate and expand and if New Zealanders can get affordable lending and services. 

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Episode Transcript

Speaker 1 (00:00):
So the Banking inquiries on the Finance and Expenditure Committee
will lead at the Finance Minister. Nikola willis with us
on it. Good morning, Good morning man. So it's part
of the coalition deal. So how much of this is
a box tech for New Zealand first versus you being
invested in what might be real issues.

Speaker 2 (00:15):
I'm very invested in this. We've had a Comments Commission
report tell us that our banks have very high levels
of profitability compared with banking and other parts of the world.
They've described the top tier of banks in New Zealand
as being like an olive Gothily they've described and having
market power, and that worries me. I believe in competition.
Competition drives better services for New Zealanders, It drives more innovation,

(00:37):
it drives more productivity. So we owe it to ourselves
to get to the bottom of these issues. See whether
we can change the regulation, See whether it is more
we need to be doing to drive competition in banking.

Speaker 1 (00:47):
The rural aspect of it. And you hear it at
the field Days and they've heard it through the Federated
Farmers polls. Is that real in your view?

Speaker 2 (00:55):
I think it is real. Because what I'm hearing from
those in the rural community there is that they have
seen a change in behavior from the banks that once
where they would be accommodated, they no longer feel that
they are. They're finding it harder to access lending, even
if they are prepared to pay the interest rates. They
point to interest rate differentials where they access loans that

(01:19):
are much higher rate of interest than people do mortgages,
and all of these issues are having a big effect
in the rural community. Around half the farmers are saying
it's their biggest pain point. So I think we owe
it to our rural communities, who are so important to
our productive economy, to look at whether they are being
served well by banks exactly.

Speaker 1 (01:38):
But this is where it gets juicy, because the retail
banks will tell you the reason that they're higher is
one the risk, but also the reserve bank rules. The
Reserve Bank will come along and tell you that the
other ones that's all bollocks and it's just and so
back and forth it will go, what do you do
about it?

Speaker 2 (01:52):
Well, first of all, you bring that argument before Parliament
and you have it out in the open. You have
it publicly in the accountable form of an inquiry and
we then get to step through the facts that are
brought to the table and judge them accordingly. My mind
is open if we need to change the regulatory requirements,
if the Reserve Bank needs to do things differently, or
if the banks need to be brought into line. I'm

(02:14):
open to all of that because this is an issue
that rarely goes to the heart of whether businesses can innovate,
whether they can expand where the New Zealanders can get
affordable mending and affordable services. This is pretty big for
the economy. I want our economy to grow. This is
critical indeed.

Speaker 1 (02:30):
But the Reserve Bank are independent. How do you interfere
with an independent operator if they're the problem.

Speaker 2 (02:35):
They are independent, but Parliament is in charge of the
legislation that guides them, and if that legislation requires amendment
in order to bess serve New Zealanders, then Parliament must
amend it.

Speaker 1 (02:47):
Can you say at this point, despite the fact that
the inquiry hasn't been held, But I take it from
your comments, change needs to happen, and change will happen.

Speaker 2 (02:57):
Change needs to happen, and change will and the banking
sector in New Zealand so that New Zealand is a
better served. And I know the banks are powerful, but
democracy is more powerful and this inquiry is going to
get to the bottom of these issues.

Speaker 1 (03:09):
Good stuff, nice to talk to you appreciate it very much.
Nicola Willis, who's the finance minister, Mike, why don't banks
just save everybody a heap of money, time and effort
and drop the agg rates to the same as the
residential commercial Will Dean, The answer is simple one, because
they carry risk. There's a greater risk in lending to
a farm than there is to a house owner and
to the Reserve Bank set the rules and so in.
That is why we're having an inquiry.

Speaker 2 (03:29):
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