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Govt must not repeat past banking mistake

29 January 2001

Govt must not repeat past banking mistake

The Prime Minister and Minister of Finance must not repeat their $640million mistake of the late 1980s by agreeing to a new Kiwi Bank, Opposition Leader Jenny Shipley said today.

"Helen Clark and Michael Cullen were in the Government that allowed a situation to develop with the BNZ that cost taxpayers a $640million bail-out when the bank nearly fell over," Mrs Shipley said.

"They must not allow political considerations to override common sense.

"Mr Anderton, who is desperate for his bank to proceed, claims the most the taxpayer stands to lose if his loopy idea falls over is $120million. That's not exactly small potatoes, and what about the customers who save money in that bank? In the event of a disaster they would qualify as unsecured creditors and Mr Anderton himself admits they would have no guarantee of getting their money back.

"But the taxpayer would have to pick up the risks in the end and he knows it. If Jim Anderton is saying the taxpayer would not help then that would be doubly cruel, as the sort of people Jim Anderton wants to lure to this bank are the people who can least afford to lose their savings in the event of a collapse.

"The risk is large because the proposal simply does not stack up commercially. Given the amount of taxpayer funds the Government plans to put at risk, Michael Cullen should come clean with all of the advice, both official and independent, which has been received about the proposal. We already know Treasury thinks it's a dog of an idea, and indications are that other financial analysts who have looked at it feel the same way.

"I challenge Dr Cullen to release the Cameron Report given to Government and the board of NZ Post, which we understand condemns the concept. New Zealanders are entitled to know the risks if they are to carry the costs if it fails.

"New Zealand has one of the most open banking systems in the world. In 1999 the World Economic Forum judged our banking system the most open of 59 countries surveyed. If a true gap existed in the banking market for a commercially viable bank, it would be closed by the market without the Government needing to get involved.

"National firmly believes that governments have no role to play in banking. History proves the taxpayer gets hurt when they try to. Mr Anderton should allow his People's Bank idea to be quietly buried the policy graveyard where it belongs," Jenny Shipley said

Ends

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