Campbell Report opts for competition

Press, 19 November 1981, Page 23

Campbell Report opts for competition

PA Sydney The Bank of New Zealand should be able to operate in Australia on the same basis as Australian banks, according to a report tabled in the Australian Federal Parliament by the Treasurer (Mr Howard). The long-awaited and comprehensive Campbell Report on the Australian Financial System firmly backs the entry of foreign banks into Australia on the same terms as local banks, with no requirement for local equity. At present the Bank of New Zealand and the Banque Nationale de Paris are the only foreign banks licensed to operate in Australia, although they are subject to a number of restrictions, particularly in the expansion of savings bank facilities where a separate licence application has to be made for each new branch. The difficulties facing New Zealand financial institutions — both banks and finance houses like Marac Holdings and Broadlands — were raised early this year by the Prime Minister (Mr Mul-

doon) in the context of the Closer Economic Relations talks with Australia. Mr Muldoon warned that he would cut Australian banking business in New Zealand if New Zealand banks were not allowed to operate freely here. The Australians were handicapped by having to await the outcome of the two-year Campbell inquiry, but as a result of govern-ment-to-government talks in May decided that special considerations would be taken into account when New Zealand financial institutions wanted to become involved in the Australian investment market. Now the Campbell Report, which was commissioned by the Federal Government in 1979 to examine the operations and efficiency of the Australian financial system against the background of the “government’s free-enter-prise objectives and broad goals for economic prosperity" has backed the entry of foreign banks into Australia. The entry rate should be carefully managed, it said,

but rejected the case of the Australian Banks for continuation of the present prohibition on foreign bank entry for five years after deregulation of the local system. The report recommended that the Bank of New' Zealand and the Banque Nationale de Paris be allowed to restructure their Australian operations to put them on the same basis as Australian banks or new foreign banks. “Foreign Bank participation in domestic banking should be restricted only through the number of licences granted," the report said. "Banking licences issued to non-residents should carry no encumbrances additional to those attaching to licences held by residents. Both residents and non-resident-owned banks should have the same privileges and responsibilities." The report said that the decision to recommend the entry of foreign banks was made because of the committee’s firm belief that adequate and vigorous competition was an essential requirement of the efficient operation of financial markets. "The committee has reason to doubt that the level of competition in banking is at present adequate to ensure maximum efficiency and maximum benefits for all consumers of banking services.” It believed that the competitive environment would be enhanced and the efficiency of the financial system increased as a result of more direct foreign bank participation. The Bank *of New Zealand has been expanding in Australia, and during the last five years has grown from two to nine branches. The newest branches are in Perth and Adelaide, where the BNZ opened its doors last month. As well as operating the trading and savings bank facilities, the BNZ also has a 50 per cent stake in a finance company. Hunter BNZ Finance’.