Edge gained on banks

Press, 12 June 1984, Page 1

Edge gained on banks

By

MICHAEL HANNAH

in Wellington

Building societies have gained an edge over their bank and finance company competitors in interest rate regulations imposed indefinitely from today. The regulations also give Government inflation-linked bonds an advantage, if not in their return to the investor as this is dependent on the rate of inflation, then at

least in the terms of investment. Traditional margins between banks, building societies and finance houses have disappeared in the latest interest-on-deposit regulations. Rates have also been cut, as was expected, to below the levels previously agreed between the institutions and the Government since February. Finance companies have been penalised, losing an advantage they previously held over banks and building societies. Instead of the three categories covered in the in-terest-on-deposit regulations in force last year (banks, building societies and finance houses), only two are created in the new regulations. Building societies and finance houses are lumped together, and allowed to offer interest rates one percentage point higher than banks on amounts under $lOO,OOO, and half a percentage point higher on amounts more than that. In previous regulations, building societies had a half a percentage point margin over banks, and finance companies had a one percentage point margin over building societies. In the process, finance company rates have been pegged back to building society rates. Building societies, championed in recent weeks by the Prime Minister, Sir Robert Muldoon, for abiding by his interest rates guidelines, have gained a bigger margin over banks. The effect was not lost on financial institutions yesterday as some executives wryly noted that the housing market was being favoured, as building societies, which are required to devote 35 per cent of their lending to housing, benefited most from the regulations.

To page 32.