“The costs of business loans and mortgage payments could be lower if our banking sector wasn’t so obscenely profitable.”
Talk by the big four Australian-owned banks of looming interest rate hikes needs to be tempered by new Reserve Bank profit data released this week showing that last year was the banks’ most profitable, the Green Party said today.
The Reserve Bank published the statutory profits of New Zealand’s major trading banks this week – data that allows the most consistent and reliable comparison of bank profits since 2002. The combined after-tax profits of ANZ, BNZ, ASB, and Westpac were up 10% from 2012 to a record $3.6 billion. Last year, Westpac was the only one of the big four banks not to post an all-time record profit.
“Our foreign-owned banks should not be talking up mortgage interest rates when they are making record profits,” said Green Party Co-leader Dr Russel Norman.
“Reserve Bank profit data released this week shows our foreign-owned banks have been making all-time record profits.
“The costs of business loans and mortgage payments could be lower if our banking sector wasn’t so obscenely profitable.
“Put more simply: record bank profits are being made at the expense of new jobs and incomes.
Dr Norman doesn’t believe an excessively profitable banking sector is the necessary price we have to pay for long-term stability in the industry.
“The stability of our banking sector is secured by careful regulation and oversight, not excessive profitability,” Dr Norman said.
“Lehman Brothers, Merrill Lynch, and Bear Stearns were all highly profitable in the years running up to their spectacular collapse.
“Excessive profits are do not represent a strong, secure banking sector; they represent the New Zealand public being ripped off.”
The Green Party has proposed a number of solutions to address the excessive profitability of our banking sector and the high degree of foreign ownership.
“One solution to the problem is to build up our New Zealand-owned banks, introducing greater competition, and stemming the flow of capital offshore,” Dr Norman said.
“New Zealand-owned banks make up only six percent of our banking sector.
“We can increase competition in our banking sector by strengthening Kiwibank and other New Zealand-owned banks and financial institutions such as credit unions.
“A strong Kiwibank is an integral part of a smart, green economy.
“The banking sector is the lifeblood of the New Zealand economy. It’s important we get it right so that we can allprosper, not just the big four foreign-owned banks.”
Reserve Bank profit data: