Latest / Early Edition with Ryan Bridge / David Tripe: Massey University Banking Expert on the potential use of private capital to bolster Kiwibank

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David Tripe: Massey University Banking Expert on the potential use of private capital to bolster Kiwibank · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: Anyone want to buy shares and Kibi Bank, you may
• 0:02
  Speaker 1: soon get the chance. Three options are on the table
• 0:05
  Speaker 1: for the government to increase Kibibank's capital and increase its
• 0:08
  Speaker 1: competitiveness with the big banks, Increasing government debt, third party
• 0:12
  Speaker 1: investment and putting it on the n z X are
• 0:15
  Speaker 1: all options for the Finance Minister, according to advice released
• 0:18
  Speaker 1: over the weekend from Treasury, which one is best? David
• 0:22
  Speaker 1: Trump and Massa University's banking expertise with US Live this morning.
• 0:25
  Speaker 1: Good morning, good morning, right, great to have you on
• 0:29
  Speaker 1: the program. David tell us which one you think is best?
• 0:35
  Speaker 2: Well, they all have their challenges. If the government raises
• 0:41
  Speaker 2: some additional funds in the market and pumps it in directly,
• 0:44
  Speaker 2: that's probably the most straightforward because it's it doesn't require
• 0:52
  Speaker 2: the involvement of anybody else to make a contribution. Did
• 1:00
  Speaker 2: the government is raising their debt funding all the time,
• 1:03
  Speaker 2: and it would just be sort of a part of
• 1:05
  Speaker 2: the debt funding they were raising. As to the the
• 1:11
  Speaker 2: the crown controlled organizations can involve, we did previously have
• 1:16
  Speaker 2: super funding the ACC investing in Kiwi Bank. They were
• 1:21
  Speaker 2: unhappy with the returns they earned and that's why last
• 1:27
  Speaker 2: year they managed to exit because they were happy with that,
• 1:32
  Speaker 2: and the similar issues apply with an index listing or
• 1:39
  Speaker 2: other private parties getting involved. The returns are not especially
• 1:44
  Speaker 2: good and that's one of the big challenges to floating
• 1:48
  Speaker 2: Gewi Bank on the as an I p O.
• 1:50
  Speaker 1: Why why their return is not good when the when
• 1:53
  Speaker 1: the Aussie ones appear to be.
• 1:56
  Speaker 2: Ah. The biggest problem is actually the matter of scale
• 2:00
  Speaker 2: and the cost of regulation and technology. What we actually
• 2:04
  Speaker 2: see is that all of the smaller banks struggle to
• 2:10
  Speaker 2: earn the sorts of returns being earned by the large banks,
• 2:13
  Speaker 2: and it's very much a consequence of the costs of
• 2:23
  Speaker 2: regulation and technology. If we go back twenty years, tsb's
• 2:30
  Speaker 2: costs were very much comparable with the all large Australian banks.
• 2:35
  Speaker 2: That has stopped being the case and the big Aussie
• 2:41
  Speaker 2: banks now have a big advantage in terms of cost.
• 2:45
  Speaker 1: So in trying to solve the big bank profit problem,
• 2:49
  Speaker 1: we are looking at a whole range of regulations that
• 2:53
  Speaker 1: could that perversely actually make the problem worse for the
• 2:57
  Speaker 1: smaller banks.
• 2:58
  Speaker 2: Well, we're putting additional regulations in place, is not really
• 3:03
  Speaker 2: going to improve anything, I don't think. On the other hand,
• 3:07
  Speaker 2: we don't really want to have small banks there that
• 3:09
  Speaker 2: are subject to less regulation because that increases the risk
• 3:14
  Speaker 2: of problems going wrong with them. So it's a bit
• 3:18
  Speaker 2: of a challenge working out how we're going to solve
• 3:21
  Speaker 2: this problem.
• 3:21
  Speaker 1: David Trite, Massi University banking expert, really appreciate your time
• 3:25
  Speaker 1: this morning. For more from Early Edition with Ryan Bridge,
• 3:28
  Speaker 1: listen live to news Talks it'd be from five am weekdays,
• 3:32
  Speaker 1: or follow the podcast on iHeartRadio.