Don Brash Should Not License Under-Funded Bank

Thursday, August 23 2001
Richard Prebble Press Releases -- Commerce

ACT leader Richard Prebble has written to the Reserve Bank, warning of the risks associated with issuing a banking licence to New Zealand Post for the proposed People's Bank.

The new bank needs a licence from the Reserve Bank before it can proceed and NZ Post lodged an application for a licence about two weeks ago.

"Cameron and Co, the independent experts, told NZ Post's directors they needed at least $100 million of capital for the new bank. The government is proposing just $83 million and then offering the assets of NZ post as collateral," Mr Prebble said.

"Setting up an under-funded bank puts the whole banking system at risk.

"The government's suggestion that the assets of the postal service be used as security is not credible. Who believes that any future government will sell post offices to keep the People's Bank going when it makes losses?

"This application is a test of the Reserve Bank Act. If the Governor grants a licence he should insist that the government adequately fund the bank.

"ACT believes that even the Cameron report is over-optimistic and a more credible level of funding for the new bank is $160 million - an amount which the government is understandably reluctant to put in," Mr Prebble said.

ENDS

For more information visit ACT online at http://www.act.org.nz or contact the ACT Parliamentary Office at act@parliament.govt.nz.

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