Banking Inquiry Delivers Major Win For Farmers

Federated Farmers is calling the final report into banking competition a major step forward for rural New Zealand - and a vindication of the farming sector’s concerns.

"This is the most significant progress we’ve seen in a generation on rural banking issues," Federated Farmers banking spokesperson Mark Hooper says.

"Federated Farmers fought hard to make this inquiry happen because we knew many farmers were getting a raw deal from their banks and felt greater scrutiny was needed.

"Throughout the process, we’ve raised firm questions and put forward constructive suggestions for how the banking system could be improved for all New Zealanders.

"Politicians have clearly listened, recognising that farmers have been facing an unfair playing field for too long - and now they’ve presented concrete changes to start fixing it."

In a long-awaited report released today, the Finance and Expenditure Committee has recommended greater transparency and oversight of rural lending.

"Federated Farmers asked for changes to ensure regular and direct scrutiny of banking bosses - and this report has delivered just that," Hooper says.

"Six-monthly appearances before the Finance and Expenditure Committee should keep the big banks honest, with significantly increased accountability and political oversight.

"It also puts the spotlight on their lending behaviour and profitability and sends a clear message: fair and competitive lending to rural New Zealand is no longer optional."

Federated Farmers also welcomes the recommendation to immediately halt any further increases in capital requirements for agricultural lending.

"This report backs what we’ve been saying for a long time - that these capital rules are stripping hundreds of millions of dollars out of rural New Zealand each year," Hooper says.

"Overly conservative capital holding rules have only added additional and unnecessary costs onto farmers. They’ve also made it much harder for farmers to access capital to grow their businesses.

"This immediate stop to increases is a huge result and will directly save farmers thousands of dollars in unnecessary interest costs."

The Reserve Bank will also be required to review capital requirements for rural lending, with changes monitored and publicly reported.

The report confirms capital rules are currently costing farmers between $555 million and $714 million each year.

The Committee is also calling for more transparency from lenders, including a requirement to formally disclose how risk margins and loan pricing are calculated.

"This has been a real grey area for farmers, who have been asking fair questions about why they’re paying so much more interest than residential borrowers," Hooper says.

"Making the banks explain those margins will give farmers much-needed visibility and clear information to secure fair financing."

Other proposals include independent reviews of the Reserve Bank’s prudential performance, and the reinstatement of market efficiency as a core Reserve Bank objective.

The Reserve Bank will also have to appear annually before the Primary Production Committee to discuss agricultural lending trends and policies, ensuring farmer-focused financial support.

"We’re really pleased the report supports open banking and standardised credit information," Hooper says.

"That’ll make it much easier for farmers to compare loans and switch banks, improving competition and access to finance."

Hooper says one area the committee could have been stronger on is climate lending rules.

"Farmers are very frustrated about having to provide emissions data, and about inconsistent and confusing information requests.

"The report calls for clearer climate-related lending rules, standardising practices to balance environmental goals with practical lending.

"However, when it comes to climate issues, we don’t think the committee has gone anywhere near far enough.

"Mark Cameron has a bill removing the requirement for banks to submit climate disclosures entirely, which would have been a much better direction to head."

Federated Farmers’ six-monthly banking survey shows having to provide emissions data to their bank is a real pain-point for many farmers.

Hooper says sustained political oversight will be key to ensuring the recommendations translate into real, long-term change.

"Recommendations are only words on a page unless Ministers and regulators act on them, but with more regular reporting and Parliamentary scrutiny, there’ll now be nowhere to hide."

Hooper says the farming voice has clearly been heard - and now it’s time for action.

"At the heart of this inquiry has always been one simple ask - a fair deal for farmers.

"This report is a major step toward that.

"If the Government and the Reserve Bank follow through, we’ll finally see a banking system that serves rural Kiwis with the transparency, competition and respect they deserve."

© Scoop Media