South Wairarapa's mayor's crusade for regional banking continues, but the Reserve Bank of New Zealand (RBNZ) says current laws give no leeway for "social responsibility".
In the light of Westpac's review of its New Zealand services, Alex Beijen has called on the Reserve Bank to provide a level playing field for NZ banks. (File image) Photo: 123RF
In the light of Westpac's review of its New Zealand services, Alex Beijen has called on RBNZ to clamp down on foreign ownership of financial institutions and "provide level playing fields for competition" for New Zealand-owned financial institutions.
He said major banks were withdrawing local services "at an accelerated rate from rural and provincial NZ, citing uneconomic viability".
"This is despite posting record billions of dollars profits.
"There has been no assessment of businesses, elderly, rural or social impact of these changes."
He suggested changing legislation to allow local Credit Unions and Building Societies (CUBS) more scope to open in towns and districts where banks are closing.
"Our NZ-owned CUBS were denied access to this funding, meaning Aussie banks are impacting their lending business with government-approved low-interest rates and making it even harder to provide services to provincial NZ."
Last month, Beijen delivered a petition of 33 regional mayors, demanding an "urgent assessment" of banking provisions for regional New Zealand and a halt on branch closures in the interim.
That move earned criticism from Wellington property investor Sir Bob Jones.
In his blog, Jones called the petition "idiocy" and said social responsibility was "invented" as "a reason to justify the banks engage in unprofitable activities just to please him".
"It's not compulsory to live in the region which attracts affluent Wellington retirees. In making that location decision, they know the trade-off is the absence of numerous big-city facilities but willingly accept this for the region's many appealing features.
"Aside from that, the closure of bank branches is a world-wide phenomenon. The majority of people cope in our new technological age. Banks are not just closing shopfronts in small towns but literally everywhere. Within three years, there will be none anywhere in the developed world."
In reply, Beijen said, "very few people disagreed that it was a case of maximising profit at the expense of our communities".
South Wairarapa Mayor Alex Beijen at Martinborough's banking hub. Photo: LDR / Wairarapa Times Age / Marcus Anselm
Beijen's Beehive trip came as Kiwibank last month announced plans to close seven branches.
Last week, Westpac's parent company said it was "reviewing the appropriate structure for its New Zealand business and whether a demerger would be in the best interests of shareholders".
The demerger announcement came within hours of RBNZ raising concerns about Westpac's risk governance processes.
RBNZ deputy governor Geoff Bascand said Westpac NZ "needs to take a close look at its risk governance practices".
"To ensure this happens, we are requiring them to provide an independent report that assesses Westpac NZ's risk governance processes and practices applied by the Westpac NZ Board and executive management."
Westpac is New Zealand's third-largest bank with more than a million customers, and more than 4000 employees.
The bank was "continuing a holistic and strategic review of the cash system", the spokesperson said.
"The current law does not allow the inclusion of social responsibility or specific service offering conditions in a banking licence, which is primarily concerned with ensuring banking operations consistent with a sound and efficient financial system and avoiding significant damage to the financial system that could result from the failure of a registered bank."
Beijen's home town of Martinborough hosts a regional banking hubs pilot.
He has been critical of the system, introduced in six towns across the country where banks had closed.
The last bank in the South Wairarapa District shut its doors three years ago.
RBNZ said it was keeping tabs on the scheme's progress.
"While this is an initiative led by the Banking sector, the Reserve Bank will also review their pilot to assess whether that model is able to adequately meet the needs of the public."