Deposit Takers Bill Risks Greater Financial Exclusion

The country’s non-bank deposit taker sector had a simple message for Parliament today on the new Deposit Takers Bill – “Don’t kill off the locals.”

The group, representing most of the country’s credit unions, building societies and regulated finance companies, fears only the large Australian banks will be able to meet the tough new standards in the Bill.

“The bill is designed to ensure stability of banks at a national and international level. The costs for us to comply would be prohibitive, so for our sector, it’s a sledgehammer,” says Ray Greenwood, a spokesperson for the group.

“Over 150,000 New Zealanders have accounts with us, and many thousands more have loans and mortgages.

“These are people and communities that are not a ‘strategic fit’ for the big banks, who only offer high volume standardised products, not the kinds of personal service we provide,” he says.

If passed, the Bill will increase the Reserve Bank’s powers to supervise the financial sector and will also introduce a deposit guarantee scheme.

“We support a new regime in principle, but it has to be made proportional to risk and our size. Right now, many of our Boards have frozen forward planning, and some of us are having to turn away customers because of the uncertainty.

“Compared to even a single trading bank we’re hardly a threat to financial stability. Our total lending is less than half a percent of that of the banks,” he says.

“The big banks make big profits, have big budgets and hundreds of staff. They’ll barely notice the extra work the Bill will impose on them, even including the cost of running the new deposit guarantee scheme.

“What’s at risk here it the competition and choice that our institutions provide.

“What we’re talking about is people in regional New Zealand who still need to go to a branch, contract workers or those on variable hours whose income isn’t guaranteed, tradies who need access to finance especially early on in their business life or families who have different financial needs for cultural reasons.

“We’re responsive to the needs of our communities, like credit unions who have a presence in low-income communities that are not of much interest to the banks.

“So, if anything defines our sector – its financial inclusion, not exclusion – and this is the issue that needs to be addressed.”

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Note to editors:

This group is made up of the following organisations:

• Auckland Credit Union
• Fisher & Paykel Credit Union
• Police Credit Union
• Unity Credit Union
• Heretaunga Building Society
• Nelson Building Society
• Wairarapa Building Society
• Christian Savings Limited
• General Finance Limited
• Gold Band Finance Limited
• Finance Direct Limited
• Mutual Credit Finance Limited
• Xceda Finance Limited

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