Kiwibank says it would welcome more capital to deliver on its purpose. File photo. Photo: Kiwibank
Kiwibank says it needs a more level banking playing field - as well as a potential cash injection - to really make a difference in the New Zealand banking market.
Submissions to the Finance and Expenditure Committee, as part of the government's inquiry into bank competition, have this week been made public.
It follows the Commerce Commission's market study, which highlighted a lack of competition, including from Kiwibank. Kiwibank was designed to be a local competitor for the big Australian banks, but has not had the capital to really take them on.
Finance Minister Nicola Willis said in August she had asked Treasury to engage with Kiwibank's parent company Kiwi Group Capital on options for raising capital, including from KiwiSaver funds or New Zealand investment funds as well as wider investment from New Zealanders.
The main four Australian banks all told the committee they felt that was unnecessary.
Kiwibank itself said in its submission it would welcome more capital to deliver on its purpose. "Kiwibank is currently focussed on a multi-year transformation that will deliver more scalable systems to enable it to further accelerate its current growth rate to compete as the 'maverick'.
Any capital injection would need to take timing of the transformation into account in order to maximise value."
It said the main banks were increasingly seeing it as a competitor but it did not have the scale to impose "competitive restraint".
"Further, where our comparatively smaller business market presence has allowed us to operate 'under the radar' and historically to grow market share, this ability is becoming eroded as we grow and the larger banks actively compete against us."
KiwiSaver provider Simplicity said it would be interested in investing in Kiwibank if that were made possible.
First Union said the solution was not to open it up to private investment, but instead to have it fully publicly owned and well capitalised.
As part of a submission made with other domestic banks, Kiwibank said there needed to be changes to bank capital requirements.
It said the big four Australian banks had much easier access to cheaper capital options as well as the backing of their parent banks, and the cost of banking regulation was disproportionately borne by the smaller players.
The banks said the capital requirements should be tiered so that as banks increased in size, they were required to carry a "genuinely higher proportionate level of capital" to reflect the increasing societal impacts that their failure would cause.
Kiwibank head Steve Jurkovich. Photo: Kiwibank
Kiwibank chief executive Steve Jurkovich said a one-size-fits-all approach did not make sense.
"An example we used, and this is not to be disparaging about anyone, is the Bank of Baroda has got $126 million in assets and ANZ has $195b - 1500 times the size - it seems a little strange to have one size fits all in terms of the consequences and protections you need for the relative impact if there is a problem."
He said it was like a high school rugby team playing the All Blacks. "They have every advantage. Over time the advantage has been reduced but I don't really understand how people can say it isn't a competitive advantage."
He said it was not unreasonable to think Kiwibank could make significant progress in growing its market share over the next five years. "We know banks have done this in the past. ASB grew very strongly through one period in its history - we know it is possible but it had CBA feeding it capital through that time as well."
Jurkovich said the focus on competition seemed the keenest he had seen in his years in the business. "In that sense I'm hopeful but the proof will be in the pudding."
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