Battle likely over BNZ ownership

Press, 8 March 1989, Page 6

Battle likely over BNZ ownership

By

PATTRICK SMELLIE,

in Wellington

Opposition to foreign ownership of the Bank of New Zealand is shaping up as the main political issue the Government will face if the National Australia Bank makes a formal offer to buy the bank. The sale issue, in turn, is fast becoming the first big test faced by the new Minister of Finance, Mr Caygill. Evidence is emerging that there is little support from the BNZ board and from the Prime Minister, Mr Lange, for resuming the sale process. Mr Lange remains a key ally for Mr Caygill, as it was partly Mr Lange’s opposition to the sale of the bank to Brierley Investments, Ltd, last December which swayed the Cabinet against it. Mr Lange appeared equivocal on the issue during questions from the Leader of the Opposition, Mr Bolger, in Parliament yesterday. Asked whether selling the BNZ was Government policy, Mr Lange pointed to the fact that the Government had agreements in principle to meet this year’s asset sales target of $2 billion but that this was achieved without selling the BNZ. Pressed further, Mr Lange said he could not comment on such a

sale without knowing what price was being offered. Parliamentary sources said yesterday that Mr Lange remained to be convinced that now was an opportune time to sell the BNZ, particularly given the highly public revelations over its bad debt provisions and forecast $l6O million loss this financial year. The failure by the rest of the BNZ board to reach an early conclusion on whether allowing the Australian bank to begin the "due diligence” process was in breach of the Bank of New Zealand Act was also seen as a sign of reluctance for sale now. One of the disputes between the Government, the former chairman, Sir Ron Brierley, and deputy chairman, Mr Rob Campbell, was over the time-consuming nature of the sale process at a time when the bank needed to sort its affairs out. The new chairman, Mr Frank Pearson, has also said that he welcomed the opportunity to set the sale process aside. But the surprise approach from the National Australia Bank — possibly prompted by the recently announced sale of the ASB (formerly the Auckland Savings Bank) to Commonwealth Bank of Australia — has thrown that time-

table out. Mr Pearson was not available for comment yesterday. A recent opinion poll released by the Public Service Association revealed that fear of selling Stateowned assets to foreign buyers was strong. The poll found 83.5 per cent of those surveyed believed privatisation would lead to sales to foreigners. It also found that support for privatisation rose dramatically from 45 to 73 per cent when the option of preventing sales to foreigners was put. If an Australian bank controlled the BNZ all the big trading banks in New Zealand would be under foreign control. But appropriate New Zealand buyers might also be hard to come by, short of holding a public share float. This is unlikely in the next three years, with a depressed sharemarket, the BNZ’s bad financial position, and the higher price which the Government would get by selling to one buyer. The Government is unlikely to want to retain ownership of the BNZ for that long, as the bank will require substantial capital by 1991 to meet international banking standards.