Banking deregulation pending

Press, 16 April 1986, Page 9

Banking deregulation pending

By

MARTIN FREETH

in Wellington

The Minister of Finance, Mr Douglas, hopes to introduce legislation before the end of June to free up banking, after delays arising from the complexity of cha? 2S required in existing acts.

Mr Douglas said yesterday he still intended to have the legislation passed through Parliament by the end of this year.

He said the legislation had proved more complex to draft than had been originally envisaged, par-

ticularly because of changes to be made in the Reserve Bank Act.

Announcing its policy to deregulate banking last November, the Government said the legislation would be introduced in the 1985 Parliamentary session.

The policy put no limit on the number of institutions that could become banks after obtaining authorisation from the Reserve Bank.

Mr Douglas said international banks had certainly shown interest in opening in New Zealand since the policy was an-

nounced, but he thought only a few would want to enter the retail banking market.

The chief economist with Westpac, Mr Rufus Dawe, said large international banks had sent representatives to examine prospects in New Zealand.

The world’s 20 largest banks would certainly be interested, if only as a matter of prestige, to include New Zealand in their networks, and many other types of financial institutions already established in the country would also probably seek

authorisations, he said. He suggested the deregulation could attract up to 30 new entrants, specialising in different aspects of banking. Mr Douglas and Mr Dawe yesterday predicted deregulation would probably have an impact of forcing interest rates down.

Mr Dawe said it could be argued that New Zealand was already “overbanked,” and the addition of new banks would make rates more competitive. “They would have to convince people that they were offering something

we have not had before, and when it comes down to the nitty gritty, all they can offer is lower interest rates,” Mr Dawe said.

The benefit of this for customers could, however, be offset by higher charging for other banking services, he said. Mr Douglas said increased numbers of banks in Australia had worked to create more competition and reduce some rates.

He believed lower rates would be the ultimate result of banking deregulation in New Zealand.