Major shake-up to banking on its way

Newshub can reveal the Government is poised to announce a major change to banking, which experts say will slash their profits.

It comes as Prime Minister Jacinda Ardern is being challenged to back-up her criticism of banks’ super profits with an inquiry – but she said this isn’t on the way.

Ardern didn’t think it was justifiable for banks to be making massive profits. But one banking expert said the banks boasting almost $10 billion in pre-tax profits isn’t necessarily bad.

“If banks aren’t making a profit, that means they’re making a loss and that’s when banks fail,” said Claire Matthews.

The plea for the Prime Minister to back up her big words with a profit probe reached Parliament.

“It’s hypocritical of Jacinda Ardern and Grant Robertson not to have an independent review of monetary policy and Reserve Bank actions that have contributed and led to large bank profits,” National leader Christopher Luxon said.

Robertson countered that.

“What we do have is a Reserve Bank that plays a regulatory and supervisory role with our banks,” he said.

And that banker who oversees the banks – Reserve Bank governor Adrian Orr – will keep his job for another five-year term, following an announcement on Tuesday.

“We do need to get continuity and stability at this time,” Robertson said.

But while the Government isn’t making moves on a review, it has been working on something for the last year which would have a massive impact on massive bank bottom lines – open banking.

“You can move your bank account and all the details and all your direct debits and so on, you can move it between banks very quickly,” said Simplicity CEO Sam Stubbs.

No, open banking doesn’t mean every Tom, Dick and Harry has access to your bank accounts. It’s about sharing data and is very common overseas.

It creates a flood of competition, which is a huge win for anyone with a bank account.

“It also brings bank profits down. The evidence seems to indicate about 10 percent,” Stubbs said.

He said open banking is the answer – and he’s done some calculations about what it would mean in Aotearoa.

“About $1.9 million, almost $2 million a day that New Zealanders would be saving if we had open banking.”

And Newshub can reveal the Government has the solution ready to go. While it didn’t have any announcements on Tuesday, a Government source said there could be one as soon as this week.

But Newshub’s been told it’s very complex and will take years to implement.

This has been part of a wider piece of work on consumer data rights. It’s already been consulted on, and while all four major banks declined to be interviewed by Newshub on Tuesday, we understand they’re pretty well ready to go.

One of the hold-ups has been on the Government’s end in working out how to communicate this, because while this is a mega shakeup, ‘open banking’ sounds scary and so is misunderstood.

Behind the scenes there’s now a scurry to get this out quickly to capitalise on the public outrage over the massive bank profits.