Banking sector review: Rural community says services as important as competition

The rural farming community wants to hear from banks if they are treating them reasonably, an advocacy group says.

There was not enough transparency to know why rural banks charged higher interest rates than urban counterparts, Rural Women New Zealand chief executive Gabrielle O’Brien told Morning Report.

The rural export sector contributed to the economy and needed more banking services, she said.

“For us, the issue around rural banking is actually even broader than the issues around lending.

“It’s also about access to services – the fact that over time we’ve had bank branches close and our rural communities, our members tell us it’s difficult to do their banking business.

“It’s difficult to get someone to talk to, face to face, who can help them understand what their options are … what it’s like running a rural business or issues you may have with a farming business.”

O’Brien said rural areas did not always have reliable and consistent connectivity, “so we can’t also just look at digital options to get around this”.

The regional banking hubs were not equipped to deal with “complex banking” issues, she said.

“We’re still waiting for terms of reference for the inquiry, but we’re encouraged by the fact that it will look at competitiveness, customer service and profitability.”

Banks on notice

Banks are being put on notice, especially rural banking services following complaints from the rural sector about high interest rates and limited access to loans.

It coincides with a Commerce Commission review of the banking sector due in August.

But the parliamentary review will go broader and deeper than the Commerce Commission’s inquiry, Finance Minister Nicola Willis told Morning Report.

“Parliament is asking them [the banks] to front up.”

The Commerce Commission inquiry was restricted to personal banking, she said, but the parliamentary review would look at business banking and rural banking too.

“I’m a big believer in public accountability and transparency. By having the banks and other entities before a public parliamentary inquiry, the New Zealand public can judge for themselves.

“The Commerce Commission is conducting its inquiry behind closed doors.”

She said banks making big profits in New Zealand compared with other countries needed to be held accountable.

“We don’t have as good a competition happening in New Zealand as other countries do, and that it is actually lessening the services to New Zealanders.”

The government would look at strengthening KiwiBank’s position whilst looking at the regulatory environment, she said.

She said complaints included a slow start to open banking, new financial firms finding it hard to innovate in New Zealand, and prudential and capital requirements of the Reserve Bank affecting different types of lending.

The government wanted to “level the playing field”, she said, and look at how the major banks – described as an oligopoly by the Commission Commerce – might be squeezing out competition.

“Success for me is a competitive banking sector because competition drives better prices for New Zealand users of bank services, competition drives innovation and new developments in banking services.”

She said the inquiry was in the “interests of democracy”.