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

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

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  Speaker 1: You're listening to a podcast from newstalks'd be follow this
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  Speaker 2: The Long Road to some sort of disruptibility in the
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  Speaker 2: banking Sector's got a new idea. Let's flow Kiwi Bank.
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  Speaker 2: That's the thinking. Documents released by Treasury suggest if you
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  Speaker 2: stuck the bank on the share market, we'd all invest,
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  Speaker 2: would we? They would get the money to get amongst
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  Speaker 2: the big players and bring about the utopian present so
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  Speaker 2: many seem to think will make some sort of difference.
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  Speaker 2: Massive University Associate Professor Clear Matthews is with us. Clear,
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  Speaker 2: very good morning to you. What end am I as
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  Speaker 2: an idea? Do you like it?
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  Speaker 3: I'll guess I'm probably a bit on the fence. On
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  Speaker 3: the one hand, if we think we want to really
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  Speaker 3: get Kiwibank doing something in the market, then they need
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  Speaker 3: capital and it's a sensible way of doing it. Whether
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  Speaker 3: there's any value in trying to actually do that with
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  Speaker 3: ki Bank, it's a different A sure Sea.
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  Speaker 2: I sit on the fence with you. I can't. There
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  Speaker 2: is no guarantee that making No matter what mechanism is,
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  Speaker 2: there is no guarantee that making Kiwibank bigger would automatically
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  Speaker 2: mean anything, would it apart from the fact it gets bigger.
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  Speaker 3: Well, that's right. I mean, if it's bigger, it's going
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  Speaker 3: to be able to operate at a similar level to
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  Speaker 3: the other banks are the other big banks. But whether
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  Speaker 3: that's actually going to make a difference. Whether they're just
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  Speaker 3: going to become like the other big banks and make
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  Speaker 3: those sorts of profits, which might be good because then
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  Speaker 3: the shareholders, including government would get bigger dividends. That might
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  Speaker 3: be good. But where that would actually make a real
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  Speaker 3: difference in terms of how the banking market operates. I
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  Speaker 3: guess we won't know unless it happens.
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  Speaker 2: No, the Big four versus the Big five, what difference
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  Speaker 2: would there be.
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  Speaker 3: There'd be an extra bank in there. One of them
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  Speaker 3: is New Zealand. One of them is New Zealand owned it.
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  Speaker 3: Because it's bigger, because it's got more capital, it may
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  Speaker 3: be able to do things slightly differently.
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  Speaker 2: Explain explain to us in what way? Because I mean
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  Speaker 2: if I can go to QWI Bank and get a
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  Speaker 2: mortgage now the same way and am ZB and Z
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  Speaker 2: or Westpac. People have decided they do or they don't.
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  Speaker 2: It's not been particularly successful patriotically speaking, if they were bigger,
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  Speaker 2: what would they do They can't do now.
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  Speaker 3: They give them capital to try different things, So what
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  Speaker 3: they might do, I mean that's crystal ball gazing, and
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  Speaker 3: so I don't know what sort of things they might
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  Speaker 3: be thinking about trying. But in reality, banking is banking,
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  Speaker 3: and so there are limited opportunities. So it's difficult to
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  Speaker 3: see exactly what they would do differently if they've got
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  Speaker 3: more capital. But you know, this is seen as been
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  Speaker 3: one of the things that can be done to try
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  Speaker 3: and make the banking sector or competitive, although I would
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  Speaker 3: argue that it is actually already quite competitive. I know
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  Speaker 3: others don't agree, and so it is really difficult to
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  Speaker 3: see really in reality how much difference it would actually bank.
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  Speaker 3: But if it's seen as important, it's a way to
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  Speaker 3: do it.
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  Speaker 2: I take it your following the Banking Inquiry like I am,
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  Speaker 2: and I heard last week. I mean, the government seems
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  Speaker 2: to have made up their mind there's something wrong with
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  Speaker 2: banking and they need to do something which brings in
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  Speaker 2: a political aspect, doesn't it.
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  Speaker 3: But I don't think it's just the government that's decided
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  Speaker 3: there's something wrong with banking. I think to an extent
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  Speaker 3: all the political parties sitting something wrong with banking, which
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  Speaker 3: reflects the fact that the New Zealand's population, but.
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  Speaker 2: We can't explain why though clear we've just been told
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  Speaker 2: there's something wrong and we go, oh, yeah, something wrong
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  Speaker 2: with them, and you go, well, like what and as
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  Speaker 2: you've just tried to articulate, you're an expert and you
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  Speaker 2: can't explain it. We've got heaps of banks.
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  Speaker 3: What scene is the problem is the fact that they
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  Speaker 3: make lots of money and what people successful. They are
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  Speaker 3: huge organizations that are working with a lot of money.
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  Speaker 3: They make a reasonable amount and they need to make
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  Speaker 3: a reasonable amount because of they don't make enough money.
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  Speaker 3: The parent mean will say, what's the point of being
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  Speaker 3: in New Zealand. It's such a small part of our operation,
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  Speaker 3: it's not worth our while. Let's get rid of it,
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  Speaker 3: and then New Zealand would.
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  Speaker 2: Be a lot worse off, which goes back to my question,
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  Speaker 2: how come you can work this out and I can
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  Speaker 2: work it out? And not not defending the banks, but
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  Speaker 2: I mean, it just seems to me I'm open to
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  Speaker 2: an argument from somebody that goes explaining to me cohesively
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  Speaker 2: why there's such a problem here and I just can't
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  Speaker 2: see it.
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  Speaker 3: I can't help you.
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  Speaker 2: And by adding another bank, I don't know what it solves.
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  Speaker 2: I mean, I maybe I get to invest in keyw Bank,
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  Speaker 2: WHIPEDI do what difference does that make to anybody apart
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  Speaker 2: from the fact I get to invest and they get
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  Speaker 2: to make some money and maybe they get bigger. But
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  Speaker 2: you know, we still have the so called broken model.
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  Speaker 2: If you believe the model is broken.
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  Speaker 3: Absolutely, so it's really difficult to see in reality what
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  Speaker 3: difference it would make, what practical value there would be. Okay, So,
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  Speaker 3: but if it's done, it's good for the government. It
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  Speaker 3: makes it look like they're doing something, looks like they're
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  Speaker 3: responding to what the public want, and so therefore that's
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  Speaker 3: going to be better.
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  Speaker 2: Okay, all right, clear, we can go about our day now.
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  Speaker 2: This is excellent. Clear Matthew's Associate professor at Massi University
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  Speaker 2: Business School. I mean, do you disagree? I mean, everybody
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  Speaker 2: goes our banking is broken. Is it explain to me how?
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