It will write to banks asking them to voluntarily disclose this information to provide more transparency and incentive to do better.
Commerce Minister Scott Simpson will also ask the Financial Markets Authority (FMA) to investigate transaction account pricing by using fair conduct principles under the Conduct of Financial Institutions (CoFI) regime to judge whether customers are being treated fairly, although it cannot force the FMA, an independent regulator, to do this.
When banks were asked to disclose the pricing of transaction and on-call savings accounts at the banking competition inquiry launched in June last year by the FEC and Primary Production Committee, most objected citing commercial sensitivity.
To improve transparency and competition, the FEC wanted to know how much profit the banks were making from everyday depositors who are effectively subsidising lending margins.
The Government has no legal power to force the banks to do this, but Finance Minister Nicola Willis says they will have to explain themselves to the public if they refuse.
Simpson’s approach to the FMA is the Government’s response to the FEC’s recommendation for a review of fees and profits on banks’ everyday accounts in its final report on the inquiry.
Willis says banks like to portray themselves as good citizens of the country and now is the opportunity for them to prove it.
The Government says it is supportive of transparency in banking and initiatives that support this.
For example, the FMA encourages banks to provide greater price transparency by publishing data on how and when they pass through changes to the Official Cash Rate (OCR). It also monitors how banks ensure the ongoing suitability of their products and services to meet consumer needs and requirements.
Standardising credit information to make it easier for people to compare loans is also on the Government’s agenda.
It will write to the industry encouraging it to consider standardising processes for residential, business, and rural customers by agreeing on standard financial information and using digital technologies, so it is easier for all customers to compare products and loan options across banks (for example, by encouraging multi- bank credit applications).
Other key FEC recommendations have already been implemented – a review of regulatory capital settings for banks and Kiwibank’s plan to raise up to $500 million from private investors to become more competitive.
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