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As anticipated, the government’s this afternoon confirmed a new market study will investigate competition within the banking sector.

It will, said finance minister Grant Robertson, consider whether the market was working well for New Zealanders and help ensure people they could trust their bank.

“There have been long standing concerns that the market is not working well for New Zealanders. Banks have consistently made high profits over a number of years and their returns have outperformed their peers in other countries,” said Robertson.

A survey from Consumer NZ found last month that trust in banks was on the decline, with 39% of New Zealanders saying they don’t confidence in them. At the time, Robertson told The Spinoff he personally did trust banks, but acknowledged there was a debate to be had about the way in which an individual consumer might have an experience with a bank.

“New Zealand’s banking sector is dominated by a small number of big players,” said Robertson today. “Four major banks make up around 85% of the mortgage and other lending market, and hold a 90% share of total bank deposits. Loans by smaller lenders are growing but remain small in comparison.

“There has not been an in-depth look into competition issues in New Zealand’s banking for some time, and New Zealand lags other countries such as Australia and the UK into doing a detailed analysis into banking services.”

The Commerce Commission will focus on examining barriers to new competitors entering or expanding in the market, added consumer minister Duncan Webb. As part of the study, the commission will also examine banks’ profitability and other financial measures to assess competition in the sector.

“The study will be completed by the end of August 2024 and will determine any actions needed to make sure competition is working for bank customers.”

In the interim, the commission will release a preliminary paper this August that will “describe the structure of the industry and provide early indications on the nature of competition”, added Webb. “Separately, we are getting on with our work on open banking and establishing a consumer data rights regime by releasing a draft Bill for consultation this week.”