Westpac voices concerns around competition in submission to RBNZ
(5 July 2019 – New Zealand) Westpac has voiced “significant concerns” around the advantages that could be handed to non-banks as part of the Reserve Bank of New Zealand’s consultation on the capital requirements for its top banks to mitigate their risk of failure.
Westpac’s submission to the RBNZ highlighted the significant opportunity created for non-banks by increasing the regulation on traditional banks and indicated that the changes would unfairly inhibit its participation in the New Zealand market.
The submission drilled down further, going on to question the wisdom of instituting regulation “with the potential to re-ignite the shadow banking system”.
“Should the capital requirements…increase, it creates an incentive for other lenders outside of the registered banking system to provide credit, because they can do so more cost effectively.
“The RBNZ’s proposals…may support the emergence of unregulated, less capitalised entities which, as we have seen in past cycles, can weaken the stability of the whole financial system.”
NAB communicated similar concerns in its response. According to the bank, the conversation around competition is particularly important given that New Zealand is operating on an open data system, which allows consumers to move their transactions between institutions with ease.