Claire Matthews: Massey University Business School associate professor on the advice to boost Kiwibank's capital

Treasury's advised the Government of three options to boost Kiwibank's capital to better compete with the Australian-owned banks.  

They include borrowing money for Crown investment, third party investment, or an Initial Public Offering on the share market.  

It comes in response to the Commerce Commission market study on personal banking. 

Massey University Business School associate professor Claire Matthews told Mike Hosking if Kiwibank is bigger, it can operate at a similar level to the other big banks.  

But, she says, whether it actually makes a real difference in how the sector operates won't be known unless it happens. 

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Episode Transcript

Speaker 1 (00:00):
The long road to some sort of disruptibility in the
banking Sector's got a new idea. Let's float Kiwi Bank.
That's the thinking. Documents released by Treasury suggest if you
stuck the bank on the share market, we'd all invest,
would we? They would get the money to get amongst
the big players and bring about the utopian present so
many seem to think will make some sort of difference.
Massive University Associate Professor Clear Matthews is with us. Clear,
very good morning to you. What end am ike as

(00:22):
an idea?

Speaker 2 (00:22):
Do you like it? I guess I'm probably a bit
on the fence. On the one hand, if we think
we want to really get Kiwibank doing something in the market,
then they need capital and it's a sensible way of
doing that. Whether there's any value in trying to actually
do that with Key Bank, it's a different issure.

Speaker 1 (00:40):
Sea, I sit on the fence with you. I can't.
There is no guarantee that making no matter what mechanism is,
there is no guarantee that making Kiwibank bigger would automatically
mean anything, would it? Apart from the fact that gets bigger.

Speaker 2 (00:53):
Well, that's right, I mean, if it's bigger, it's going
to be able to operate at a similar level to
the other banks are the other big banks. But whether
that's actually going to make a difference. Whether they're just
going to become like the other big banks and make
those sorts of profits, which might be good because then
the shareholders including government would get bigger dividends. That might
be good. But where that would actually make a real

(01:14):
difference in terms of how the banking market operates. I
guess we won't know unless it happens.

Speaker 1 (01:20):
No, the Big four versus the Big five, what difference
would there be.

Speaker 2 (01:26):
There'd be an extra bank in there. One of them
is New Zealand. One of them is New Zealand owned it.
Because it's bigger, because it's got more capital, it may
be able to do things slightly differently.

Speaker 1 (01:38):
Explain Explain to us in what way? Because I mean,
if I can go to Kiwi Bank and get a
mortgage now the same way am ZB and Z or Westpac.
People have decided they do or they don't. It's not
been particularly successful patriotically speaking. If they were bigger, what
would they do they can't do now.

Speaker 2 (01:55):
They give them capital to to try different things. So
what they might do. I mean that's crystal ball gazing,
and so I don't know what sort of things they
might be thinking about trying. But in reality, banking is banking,
and so there are limited opportunities. So it's difficult to
see exactly what they would do differently if they've got
more capital. But this is seen as being one of

(02:19):
the things that can be done to try and make
the banking sector or competitive, although I would argue that
it is actually already quite competitive. I know others don't agree,
and so it is really difficult to see really in
reality how much difference it would actually make. But if
it's seen as important, it's a way to do it.

Speaker 1 (02:37):
I take it your following the Banking inquiry like I am,
and I heard last week. I mean, the government seems
to have made up their mind there's something wrong with
banking and they need to do something which brings in
a political aspect, doesn't it Absolutely?

Speaker 2 (02:52):
But I don't think it's just the government that's decided
there's something wrong with banking. I think to an extent,
all the political parties sitting something wrong with which reflects
the fact that the New Zealand population.

Speaker 1 (03:03):
But we can't explain why though, clear we've just been
told there's something wrong, and we go, oh yeah, something
wrong with them, and you go, well, like what you
and as you've just tried to articulate, you're an expert
and you can't explain it. We've got heaps of banks.

Speaker 2 (03:17):
What scene is the problem is the fact that they
make lots of money and what people's successful. They are
huge organizations that are working with a lot of money.
They make a reasonable amount, and they need to make
a reasonable amount because of they don't make enough money.
The parent men will say, what's the point of being
in New Zealand. It's such a small part of our operation,

(03:38):
it's not worth our while. Let's get rid of it.
And then New Zealand would.

Speaker 1 (03:41):
Be a lot worse off, which goes back to my question,
how come you can work this out and I can
work it out? Not not defending the banks, but I mean,
it just seems to me. I'm open to an argument
from somebody that goes explain to me cohesively why there's
such a problem here, and I just can't see it.

Speaker 2 (03:59):
I can't help you.

Speaker 1 (04:01):
And by adding another bank, I don't know what it solves.
I mean, I maybe I get to invest in Key
with a bank WHIPPEDI do what difference does that make
to anybody apart from the fact I get to invest
and they get to make some money and maybe they
get bigger. But you know, we still have the so
called broken model. If you believe the model is broken.

Speaker 2 (04:19):
Absolutely, so it's really difficult to see in reality what
difference it would make, what practical value there would be. Okay, So,
but if it's done, it's good for the government. It
makes it look like they're doing something, looks like they're
responding to what the public want, and so therefore that's
going to be better.

Speaker 1 (04:39):
Okay, all right, clear, we can go about our day now.
This is excellent. Clear Matthew's associate professor at Massi University
Business School. I mean, do you disagree. I mean, everybody
goes our banking is broken. Is it explain to me how?
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