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

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

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  Speaker 1: You're listening to a podcast from News Talk ZB follow
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  Speaker 2: Now, if you've been looking at the huge profits the
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  Speaker 2: big banks Westpac and A and Z have been reporting
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  Speaker 2: in the last couple of weeks and you've had raised eyebrows,
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  Speaker 2: you may be pleased to know the Government has agreed
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  Speaker 2: to act on all nineteen recommendations from Parliament's recent banking inquiry.
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  Speaker 2: But you may be disappointed to know it's all pretty
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  Speaker 2: low level stuff. Ken Dustin from the Banking Reform Coalition
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  Speaker 2: is with us high Kent Evening Heather, it's is actually
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  Speaker 2: going to make a difference.
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  Speaker 3: Well, look, these aren't bad recommendations in full, Marx to
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  Speaker 3: the Government for adopting everything that's come out of the
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  Speaker 3: Select Committee. I mean it's a good step, right, it's
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  Speaker 3: not going to hurt. But you know, as you said
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  Speaker 3: in your intro, I think the big issue here is
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  Speaker 3: that the banks simply don't care whatever Parliament says. You know,
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  Speaker 3: we've got we're on the back of an inquiry from
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  Speaker 3: the Commerce Commission, another inquiry from Parliament from the Select Committee,
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  Speaker 3: and you hear is Westpac cranking its profits thirteen percent,
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  Speaker 3: and A and Z cranking them up a full twenty
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  Speaker 3: one percent. So whatever it is that Parliament's saying, I mean,
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  Speaker 3: clearing their banks, aren't listening.
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  Speaker 2: Now, is there? What of the recommendations which do you
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  Speaker 2: think may be the most effective in doing something here?
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  Speaker 3: Well, as I said, none of them are bad. But
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  Speaker 3: what they're going to need to be effective is legislative teeth.
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  Speaker 3: So the thing that we're really keen on is the
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  Speaker 3: changes that they're making to payments end Z and in
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  Speaker 3: Payments in Z really is the gateway to open banking.
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  Speaker 3: It's the reason that we don't have, for instance, real
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  Speaker 3: time transactions moving between banks in New Zealand the same
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  Speaker 3: way that practically every other civilized country in the OECD does.
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  Speaker 3: And so the recommendation is that, well, Payments in Z
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  Speaker 3: needs to reform its governance. It's not a bad step,
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  Speaker 3: but fundamentally that's going to have to get backed up
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  Speaker 3: with legislation, and probably sooner rather than later. And that
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  Speaker 3: means taking the power to block open banking off the
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  Speaker 3: banks in legislating for it exactly the same way as
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  Speaker 3: we legislated for the breakup of Telecom New Zealand years ago.
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  Speaker 2: I think that open banking is that much of a
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  Speaker 2: game changer, because last I saw in Australia, and to
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  Speaker 2: be fair, it's been a while now, but last I
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  Speaker 2: saw in Australia, it really hasn't changed the game much.
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  Speaker 3: Well, the big issue is competition, or the complete lack thereof.
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  Speaker 3: You know, we've got the major four banks, you know,
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  Speaker 3: depending on which market you look at, round about ninety
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  Speaker 3: percent market share, and the only way we can change
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  Speaker 3: that is by getting new banks in. And by new banks,
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  Speaker 3: we don't mean those old traditional high street banks. What
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  Speaker 3: we mean are these nimble FinTechs who can start offering
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  Speaker 3: those kind of products. But without open banking, it's all
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  Speaker 3: dead in the water.
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  Speaker 2: Yeah, okay, so how much of a game changer is
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  Speaker 2: open banking?
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  Speaker 3: Open banking can be a huge game changer, and there
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  Speaker 3: are some really nimble FinTechs out there who are poised
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  Speaker 3: to do things. But as it stands, without legislation, without
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  Speaker 3: Parliament saying yeah, we want this thing, we want to
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  Speaker 3: get going on it really quickly, and we want to
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  Speaker 3: put some hard deadlines for the banks to step up,
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  Speaker 3: then really, you know, we'll still be having this conversation
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  Speaker 3: in five years time.
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  Speaker 2: Okay, So if what I'm feeling right now is disappointment,
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  Speaker 2: that would be that would be a fair reaction.
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  Speaker 3: I think just about everybody in New Zealand is going
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  Speaker 3: to be disappointed in the sense that they're looking at
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  Speaker 3: the amount of money that's being taken offshore by the
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  Speaker 3: Australian owned banks in the middle of the deepest recession
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  Speaker 3: we've had in the generation, and thinking what you know.
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  Speaker 3: In A and Z's case, profits up twenty one percent,
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  Speaker 3: But they didn't get there by being twenty one percent
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  Speaker 3: better at what they do, or twenty one percent more customers,
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  Speaker 3: or twenty one percent more innovative. They've simply stuck their
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  Speaker 3: hands in New Zealander's pockets longer and deeper than the
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  Speaker 3: year before. And I think everyone in New Zealand would
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  Speaker 3: be looking at and saying, when is this going to end?
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  Speaker 2: Okay, Kent, if you could do one thing to fix banking,
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  Speaker 2: what would it be.
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  Speaker 3: I'd break up A in Z to be perfectly honest,
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  Speaker 3: to make it we've got legislative exactly the same way
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  Speaker 3: as we separated.
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  Speaker 2: Did you divide out from what?
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  Speaker 3: Well, we'd simply say that no bank can be more
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  Speaker 3: than ten percent of the market and break it up
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  Speaker 3: into its bits and allow those pieces to be invested in,
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  Speaker 3: preferably by New Zealanders, so that the profits stay on
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  Speaker 3: shore rather than going offshore. And instead of having two
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  Speaker 3: large banks, we could end up with maybe seven or
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  Speaker 3: eight or nine much smaller banks who would genuinely, genuinely
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  Speaker 3: compete with one another.
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  Speaker 2: When you say that this is a good idea, have
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  Speaker 2: you weighed up the shock that it would create for investors.
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  Speaker 3: Hither, You're entirely right. It would be a shock for investors.
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  Speaker 3: But here's the thing, it will be a shot for
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  Speaker 3: overseas investors because at the moment too much of our
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  Speaker 3: banking industries is owned by the Australians. What we need
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  Speaker 3: is to bring that investment back on shore. We have
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  Speaker 3: the key. We saver funds, for instance, are dying to
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  Speaker 3: invest in high quality. Yes, it's like the banks, but
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  Speaker 3: because of the structure of our sector, they're pretty much
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  Speaker 3: locked out of it. So New Zealanders could be the
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  Speaker 3: ones benefiting from our banking sector rather than all the
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  Speaker 3: money going to Australia.
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  Speaker 2: Hey, thank you very much. Ken does always appreciate it.
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  Speaker 2: Kent Dustin, who is from the Banking Reform Coalition.
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