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Banks would look to pass on costs to customers if capital requirements enacted - Shane Jones

Banks would look to pass on costs to customers if the Reserve Bank’s proposed capital requirements come into effect, Regional Economic Development Minister Shane Jones believes. 

On TVNZ1's Q+A last night, Mr Jones spoke of his meeting with ANZ chief executive Shayne Elliott in Melbourne last week.

"Let me absolutely be clear about this – after the meeting with Shayne Elliott, the ANZ CEO, I’ve not got a sliver of doubt in my mind that they are not going to absorb these costs; they are going to look to pass them on.

"If those capital requirements go through, my interpretation of Mr Elliott is that they will significantly change their model of operation in New Zealand."

The Reserve Bank has proposed to make New Zealand banks increase capital over five years. 

He said despite being "unhappy" about the possibility of costs being passed on, "that is between the governor of our Reserve Bank and them, and I think that will do inordinate damage to the brand and the social license of ANZ Bank". 

When asked if the Reserve Bank needed to pull back, or meet the Australian banks halfway, Mr Jones disagreed and said there needed to be a mature conversation. 

"The Governor (Adrian Orr) fully understands that if you make any changes about where the banks are likely to go in regional New Zealand, it's not only the quantum, but it's over what period of time does this cost structure change."

Mr Jones said he and Mr Elliot "agreed that there has to be more innovation and opportunity for the banks to collaborate and generate solutions in regional New Zealand, so we don’t see a wholesale withdrawal of services". 

On if the bank would pull out of rural New Zealand, Mr Jones said he suspected "if they want to maintain their social license, you can’t send vast swathes of the agri-business sector in rural New Zealand to the wall".

"I mean, who’s going to buy such assets?"

Q+A is on TVNZ1 Mondays at 9.30pm, and the episode is then available on TVNZ OnDemand and as a podcast in all the usual places.

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The Regional Economic Minister talks about his meeting with ANZ’s chief executive on August 5. Source: Q+A