Competition study into personal banking services

Government response to market study

On 9 December the Government announced its response to the Commerce Commission’s market study into personal banking services.

The Government has agreed to all 14 recommendations made by the Commerce Commission to improve competition for personal banking services for the long-term benefit of consumers in New Zealand.

Key actions will include:

• Exploring with Kiwibank and its owner (Kiwi Group Capital Limited) a range of capital-raising options to make Kiwibank a disruptive competitor.
• Issuing a new Financial Policy Remit to the Reserve Bank which emphasises the importance of competition in the Bank’s decision making in regard to prudential policy.
• Assessing if it is appropriate for government agencies to adopt open banking functionality to accelerate progress, and help build a market and confidence, in open banking.

Significant progress has already been made to address issues identified in the Commission’s report, including:

• Progressing the Customer and Product Data Bill to set the legislative framework for open banking.
• Monitoring the effects of the Credit Contracts and Consumer Finance Act 2003 Responsible Lending Code changes and improving the penalty regime in the Act to lessen the barriers to switching to home loan providers.
• Considering the Depositor Compensation Scheme levy rates and transitional support arrangements for phasing in the levies.

Next steps for banking competition(external link) — Beehive.govt.nz

(external link)Cabinet Minute CBC-24-MIN-0129: Government’s response to the Commerce Commission’s competition market study into personal banking services(external link) — The Treasury New Zealand

Cabinet Paper CBC-24-SUB-0129: Government’s response to the Commerce Commission’s competition market study into personal banking services(external link) — The Treasury New Zealand

Commerce Commission's final report

On 20 August 2024, the Commerce Commission published its final report setting out their findings and recommendations from its competition study into personal banking services in New Zealand.

The Commerce Commission:

• found that New Zealand’s 4 largest banks do not face strong competition when providing personal banking services, and
• made 14 recommendations with the aim of promoting competition for the long-term benefit of consumers in New Zealand.

Final personal banking services competition study report (external link)— Commerce Commission

Delivering more competitive banking for Kiwis(external link) — Beehive.govt.nz

Background

On 20 June 2023, the Government asked the Commerce Commission to begin a competition market study into any factors that may affect competition for the supply or acquisition of personal banking services and to make its final report for the study publicly available by 20 August 2024.

Personal banking services cover a number of essential services for individuals and households, including:

• savings and deposit services
• mortgages
• other lending.

This topic was chosen because of the importance of personal banking services for household saving and spending and for the New Zealand economy. There are indications that competition in the sector may not be working as well as it can for consumers.

Market study to investigate banking competition(external link) — Beehive.govt.nz

Gazette notice for the study(external link) — Gazette.govt.nz

Further details on the Commerce Commission’s study into personal banking services are available on the Commission’s website.

Competition studies(external link) — Comcom.govt.nz