5. Question No. 5—FinanceKATIE NIMON (National—Napier) to the Minister of FinanceQuestion No. 5—Finance5. KATIE NIMON (National—Napier) to the Minister of Finance: What recent reports has she seen on the banking sector?Hon NICOLA WILLIS (Minister of Finance): Today the Commerce Commission released its final competition report into personal banking services. The report provides substantial evidence that New Zealand's banking sector is uncompetitive and that Kiwis are not well served by a two-tier oligopoly. The report makes it clear that our banks are highly profitable compared with international peers they lack innovation and do not aggressively compete for market share. Instead competition resembles a cozy pillow fight with greater focus given to maintaining profit margins than serving New Zealanders well. We are concerned that New Zealand customers are missing out and that as a result of this imperfect competition they are facing higher prices limited choices and poorer service—even when compared to customers of the same parent banks in Australia.Katie Nimon: What recommendations did the Commerce Commission make?Hon NICOLA WILLIS: The commission has made 14 recommendations aimed at encouraging more disruptive players into the market increasing the level of competition between existing players and empowering consumers to get a better deal from their banking services. In the short term the commission found that providing Kiwibank with access to more capital has the greatest potential to disrupt and deliver more competitive services to New Zealanders. In the medium to long term the commission finds that open banking has the greatest potential to promote ongoing disruptive competition by allowing innovative new players such as fintech firms to enter the market and offer banking services to Kiwi consumers that compete with the traditional banks.Katie Nimon: What recommendations does the report make about Kiwibank?Hon NICOLA WILLIS: Well one of the key recommendations is for the Government to support Kiwibank to become a real competitor to the major banks. At the moment Kiwibank is only just nipping at the heels of the big Australian-owned banks with just 5 percent of the market. To compete more aggressively with the Aussie banks Kiwibank needs significantly more capital. I have asked the Treasury to engage with Kiwibank's owner Kiwi Group Capital to understand the best options for providing Kiwibank with the capital it needs. The Government will explore all the options for where that additional capital might come from. Possibilities include KiwiSaver funds New Zealand investment funds and everyday New Zealanders themselves looking for home-grown places in which to put their money and invest in New Zealand's future. I will take proposals to Cabinet no later than December this year.Katie Nimon: What other actions is the Government taking in response?Hon NICOLA WILLIS: A number of the Commerce Commission's recommendations relate to existing work that is already being progressed by this Government. For example the Government led by Minister Bayly is progressing work to create a consumer data right to give—Hon Dr Duncan Webb: Great bill. We did that.Hon NICOLA WILLIS: —customers greater control over how their data is accessed and used. While they chuff themselves I remember they talked a lot about open banking; they didn't deliver it. For sectors like banking this change will make it easier for consumers to switch providers or for innovative and disruptive new players like fintechs to enter the market and compete. The Government's already scrapped the overly prescriptive Credit Contracts and Consumer Finance Act 2003 regulations and we've updated the Responsible Lending Code to ensure loan application processes are fair and flexible. Later this year I will issue a revised Financial Policy Remit for the Reserve Bank outlining the Government's view that improving competition in the banking sector should be a stronger factor in the Reserve Bank's decision making. This is in line with the Commerce Commission's recommendation. This Government is committed to delivering a more competitive banking sector so New Zealanders can get a better deal. That's why we are taking action to address all 14 of the commission's recommendations.