3 December 2012

Governor misled Parliament on bank profitability

Reserve Bank Governor Graeme Wheeler misled Parliament at his first appearance at the Finance and Expenditure Select Committee when he told the members that bank profits were “about average or below” most other OECD economies, the Green Party said today.

Data now obtained from the Reserve Bank by the Green Party under the Official Information Act shows that New Zealand banks’ pre-tax returns on assets from 2009-2011 make them the fifth most profitable banks in the OECD, with only Iceland, the Czech Republic, Singapore, and Australian banks more profitable.

“The Governor was wrong to tell Parliament that our foreign-owned banks are only making average, or below average profits,” said Green Party Co-leader Dr Russel Norman.

“The Reserve Bank’s own bank profitability data ranks our big four Australian banks as the fifth most profitable in the OECD.

“Our new Governor’s complacency about bank profitability is concerning. His job is to regulate our banks, not be their champion.”

Earlier in the year, the independent Bank for International Settlements found that Australasia's big four banks were the most profitable in the developed world for 2010 and 2011. In 2011, Australian banks made a pre-tax return of 1.19 percent on assets compared with a global average of 0.36 percent.

“The Governor’s mistake demonstrates one of the limitations of having one person solely responsible for the decisions of the Reserve Bank,” said Dr Norman.

“Boards make better decisions than individuals and are less prone to capture by the industry they regulate. This is why no other OECD country vests this much power in one person.

“The simple fix is to make the Reserve Bank Board accountable for significant Reserve Bank decisions – like setting the Official Cash Rate – and ensure the Board includes representatives from the wider economy, like the export and manufacturing sectors.

“The excessive profitability of our Australian-owned banking sector is to the detriment of other sectors in the economy, like manufacturing and agriculture, and affects anyone on a personal level that has a mortgage, credit card, or has savings in a bank.

“If we care about creating jobs and maintaining our incomes, we can’t afford to have a complacent bank regulator that looks at excessive bank profits and then looks away.”

Reserve Bank profitability data released under the OIA:
http://www.greens.org.nz/sites/default/files/reserve_bank_banking_system_comparisons.pdf

Bank for International Settlement data:

Click for big version.
Source: Bank for International Settlements. 82nd Annual Report. 24 June 2012. p.79.

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Scoop Business: Bathurst Gets Nod For DoC Access To Denniston Mine

Conservation Minister Nick Smith has approved access over conservation estate land for Bathurst Resources to develop an open cast coal mine on the Denniston Plateau, above Westport, to the dismay of environmental opponents.

The timing for Smith’s move avoids Bathurst having to resubmit applications for access agreements under the revised Crown Minerals Act, which comes into force tomorrow and would have required public consultation.

The announcement lands in the middle of delicate negotiations between the company, environmental groups and other interested parties that could pave the way to a broader agreement on the Escarpment proposal, whose resource consents are still subject to court appeals. More>>