We advocate for structural reform of the banking sector in New Zealand.

Our banking industry is broken.

The four Australian banks – ANZ, ASB, BNZ and Westpac – are collectively extracting stratospheric levels of profit from New Zealand families and businesses.

Compared to international benchmarks, the four Australian banks are 50-100% more profitable than they should be. This is having a hugely negative effect on families and businesses and farmers and iwi across the country – people are paying more than they should for credit cards and mortgages and loans, and receiving less than they should for savings and deposits.

The costs of this toxic behaviour are huge. This year, the four Australian banks will extract $3-$3.5 billion more than they should from us. That’s nearly $10 million a day in unearned and unjustified profit.

It’s made up of the excessive Paywave fees, the stratospheric credit card interest, the high mortgage rates, and the pitiful savings interest. It’s coming out of the pockets of New Zealanders every day, draining the lifeblood out of our economy.

And the huge profits exported by the Australian banks don’t create jobs for New Zealanders, build businesses or farms for New Zealanders, secure the livelihoods of New Zealanders, or improve the wellbeing of our people or our economy or our environment.

They’re also not being re-invested into our financial systems. Our country is now decades behind other developed nations – we don’t have real-time transactions, account portability, or the vibrant Fintech sector that has rejuvenated banking overseas. Instead, we have ancient and insecure financial systems that are riddled with fraudsters and scammers.

The four Australian banks have become a major drain on our personal and national prosperity, pumping our collective wealth overseas, enriching other countries who have no stake and no interest in building a better New Zealand. Our country is being slowly impoverished in order to make a small group of international bankers very rich indeed.

There’s no reason why this needs to continue. The Banking Reform Coalition has a simple and straightforward prescription for restoring the fairness of our banking system, and drawing a line under the predatory behaviour of the Australian banks.

Our plan is effective and pragmatic – structural separation of our financial system. This will lower costs, open up banking to new competitors and an innovative Fintech sector, restore genuine competition, raise service levels, and make our financial system more robust.

There are a few simple steps needed to restore the fairness and equity in New Zealand’s banking system, and we call on our national leaders to take immediate action to achieve them.

Structural separation is the answer

Our plan is based on earlier lessons from the telecommunications industry: the most effective way of reforming an entire sector is structural separation – because it’s fast, cheap, and effective. In the case of the banking industry, it works like this:

What this means

Banks can choose to be retail banks serving customers, or they can be wholesale banks serving the industry – but not both.
All existing banks must decide to be retail banks or wholesale banks, but there can be no common ownership of the two types.
Where a bank remains a Systemically Important Domestic Bank (SIDB) as assessed by the Reserve Bank after structural separation has occurred, it must be broken up to ensure no single bank can pose a systemic risk to the New Zealand economy if it fails.
The open banking platform for New Zealand must not be owned by the banks, and must be an independent organisation with independent governance and a requirement to deliver open banking services on a neutral basis.
The open banking platform can make a profit, but this profit is regulated by legislation, in the same way as Chorus for telecommunications and lines companies for electricity supply.

These simple and easily implemented changes will establish a level playing field for all current and emerging banks, and allow competition and innovation to flourish.

Here’s the plan

The rights of New Zealanders are more important than the rights of bank shareholders.

We seek immediate action from regulators to curtail the excessive profits of the Australian banks, action from law enforcement to prosecute them for their unjust enrichment at the expense of their customers, and their ongoing abuse of market power.

We require restitution.

We seek the levying of an immediate windfall tax on the excessive profits of the Australian banks, equivalent to 50% of their post-tax profits over the last five years. These profits were simply taken rather than earned, and need to be returned to New Zealand to benefit our people and our nation.

The vertical integration of the banking industry has failed New Zealand and must be ended.

We seek that the banking sector be separated into retail banks, wholesale clearing banks, and enabling infrastructure, using the same model as the telecommunications industry, in order to remove the excessive market power of the Australian banks and to allow innovation and competition to flourish.

Open banking is in the best interests of all New Zealanders.

We seek an independent platform for banking innovation, by ensuring our essential open banking infrastructure and the standards it depends on are fully neutral, and provides a fair playing field for all existing and emerging financial service providers. We seek that customers are given access to the latest open banking technologies such as account portability, and that the requirement for all banks to provide these services forthwith is legislated as a matter of urgency.

The preferential treatment of the Australian banks must stop.

Banks must be responsible for their mistakes.

We seek an immediate end to the preferential capital requirements being granted to the Australian banks by the Reserve Bank, an end to their preferential status in existing and new legislation, such as the Deposit Takers Act, and the opening of core Reserve Bank systems to the full range of banks and Fintechs.

We seek urgent legislation that makes banks 100% liable for fraudulent transactions on their systems, and fully responsible for the security of the financial system. And we seek that customers who have been defrauded must be reimbursed within 30 days, under the threat of fines from regulators.

It is a right of all New Zealanders to have access to the banking services they need.

We seek that banking services are immediately included as a fundamental human right, because a bank account is needed to participate in our society. As many as 50,000 Kiwis do not have a bank account because they are excluded by the arbitrary and unfair policies of the Australian banks. They have been granted no right to know why they’ve been discriminated against nor any right of appeal. We demand urgent legislation to entrench access to fair banking for all New Zealanders.

The Banking Ombudsman needs full legislative authority.

Contracts must be equitable.

A full range of financial institutions are essential for a healthy economy.

We seek that the Banking Ombudsman be made fully independent of the banks, with the full weight of statutory authority to investigate and prosecute cases where consumers’ rights are infringed, to compel banks to act fairly, and to levy fines and penalties for non-compliance. And where these reforms require additional regulatory oversight, we seek additional Crown funding to provide sufficient resources.

We seek that all the core contracts between banks and their customers are made transparent, equitable and consistent in legislation, as with insurance contracts. And we seek an end to unfair and punitive conditions and fees, such as bank-mandated insurance requirements.

We seek immediate regulatory reform to remove the unfair and unnecessary burden being placed on smaller financial institutions, and community and not-for-profit financial service providers such as friendly societies, credit unions and financial mutuals. And we demand the re-establishment of Trustee Savings Banks as community owned, government guaranteed retail finance institutions, set up under democratic and philanthropic principles.

Who we are

We’re the Banking Reform Coalition, and we want to see significant, structural change in New Zealand’s dysfunctional banking system - sooner rather than later.

We’re in the process of registering an Incorporated Society, and in coming weeks we’ll throw open the membership doors to everyone who wants to join us in making our banking system fairer, more affordable and more innovative.

In the meantime, you can email us, and follow us on LinkedIn and Facebook.