Business. Scoop » Scott Weenink On Why New Zealand’s Banking Sector Needs More Competition
Article – Hugh GrantThe appetite for choice is real. What has been missing is a settled framework, including a clear licensing regime and consistent regulatory standards, that allows that choice to grow. . .
Article – Hugh GrantThe appetite for choice is real. What has been missing is a settled framework, including a clear licensing regime and consistent regulatory standards, that allows that choice to grow safely. By Scott WeeninkChair of Xceda Capital GroupEvery now and then a change that sounds purely technical turns out to matter a great deal. The Reserve Bank’s recent decision is one of those. From the end of 2028, once the Deposit Takers Act is fully in force, deposit takers that are licensed under the new regime will be allowed to call themselves banks. On its face it is a change in terminology. In practice it could reshape who New Zealanders trust with their money. The word bank carries weight. It signals safety, permanence and scale. For years, institutions that take deposits and lend responsibly, but sit outside the formal bank register, have been unable to use it. That single restriction has shaped where people feel comfortable saving, and it has quietly protected the position of the largest players. And the largest players are very large indeed. The big four Australian-owned banks hold well over ninety per cent of customer deposits in this country. By international standards that is an unusually concentrated market. Concentration is not wrong in itself, and our major banks are well run and soundly capitalised, but a market with so few meaningful alternatives is rarely the most innovative or the most responsive to customers. This is where competition earns its keep. When smaller institutions can compete on a fairer footing, the benefits flow to ordinary savers and borrowers: sharper rates, faster decisions, products built for people the big banks find too small to bother with, and a reason for everyone in the market to work a little harder. Letting credible, licensed and prudentially supervised deposit takers describe themselves accurately is part of levelling that playing field. So too are the wider reforms under the Deposit Takers Act, which apply a more consistent prudential framework across all deposit takers. Alongside this sits the new Depositor Compensation Scheme, under which eligible deposits are protected up to $100,000 per depositor per institution, an important step in strengthening depositor confidence. I see this from a particular vantage point. As Chair of Xceda Capital Group, which owns Xceda Finance, a licensed non-bank deposit taker supervised by the Reserve Bank, I spend a good deal of time with people who want a genuine alternative to the major banks, and thinking about the structural barriers that have made building one harder than it should be. The appetite for choice is real. What has been missing is a settled framework, including a clear licensing regime and consistent regulatory standards, that allows that choice to grow safely. That last word matters. None of this is an argument for weaker protection of people’s savings. The opposite, in fact. The strength of the new regime is that it brings banks and non-bank deposit takers under one set of prudential rules, so that a more competitive sector is also a properly supervised one. Competition without sound regulation helps no one. Competition built on consistent, credible standards is exactly what a healthy financial system should want. There is a bigger ambition worth naming too. At the moment, a very large share of New Zealanders’ savings sits with institutions owned across the Tasman. We should be confident enough to imagine homegrown institutions holding a far greater share of homegrown deposits, with the profits, the decision-making and the long-term commitment that come with that. Other countries have rebooted their banking sectors to make room for new and smaller competitors. There is no reason we cannot do the same. The end of 2028 sounds a long way off, and the practical work of licensing and transition will take time. But the direction is now set, and it is the right one. A banking sector with more genuine choice, more homegrown ambition and the same high standards of safety is good for savers, good for borrowers and good for the country. It is a change worth getting behind. About Scott Weenink:Scott Weeninkis an investor, company director and corporate finance lawyer, with a career spanning financial services, funds management, telecommunications and technology across New Zealand, Asia and the Middle East. He is Chair of Xceda Capital Group, which owns a licensed non-bank deposit taker, and a founding shareholder of Generate, one of New Zealand’s largest KiwiSaver providers, which he chaired for several years. Earlier in his career,Scott Weeninkheld senior legal and executive roles at Ooredoo Group, Auckland Airport and Modica Group, having begun as a mergers and acquisitions lawyer admitted in New Zealand, Australia and the United Kingdom. He holds a masters in law from Oxford and remains active as an investor and board member in high growth businesses. You can read more fromScott Weeninkon his portfolio, and follow the latest thinking fromScott Weeninkon finance, governance and technology. Content Sourced fromscoop. co. nzOriginal url