Wheeler denies bank bias
Reserve Bank Governor Graeme Wheeler is massaging data to make New Zealand banks look less profitable, the Green Party says.
Tuesday, December 4th 2012, 2:45PM
by Susan Edmunds
Data obtained from the Reserve Bank by the Green Party shows New Zealand banks' pre-tax returns on assets from 2009-2011 make them the fifth most profitable in the OECD, with only Iceland, the Czech Republic, Singapore, and Australia’s banks more profitable.
Wheeler had told the Finance and Expenditure Select Committee that bank profits in New Zealand were about average or below those of other OECD economies.
Co-leader Russel Norman said even the data showing New Zealand in fifth place was excluding banks in European Union countries, which were less profitable.
“But even on his own graph New Zealand banks are the fifth highest, even if you massage the data… I can’t see how that’s a reasonable response.”
Norman said 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.
Wheeler said the Reserve Bank had commissioned the data before his appearance at the hearing but the analysis was not complete when he was asked about profits.
“My response to the select committee represented my understanding of the information available at that time. Our analysis was completed after the hearing and we released it to the Green Party in response to their request, which followed the hearing. We are now releasing it publicly.”
Wheeler said different measurement practices around the world, including or excluding tax and extraordinary items, meant international comparisons of bank profit figures were not easy.
Norman said it was a concern that Wheeler seemed to be supporting the banks. “He’s a regulator of banks and if he’s advocating for banks, at odds with the evidence, that’s quite concerning.”
Wheeler denied any bias. “The Reserve Bank takes seriously its mandate from Parliament to supervise the New Zealand banking system, and it does so without favour. Australasian-owned banks emerged in better shape from the global financial crisis because of their more conservative management, and our economies benefit from that strength. New Zealand’s strong banking system helped see the country through the global financial crisis.”
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The OCR ain't going anywhere
The new Reserve Bank governor, Graeme Wheeler, predicts that the official cash rate won't by going anywhere until 2014.
This is clear from the 90-day bank bill forecast graph in the December Monetary Policy Statement. It shows clearly how over the past year forecast increases kept getting pushed down each quarter.
A year ago the bank was predicting the 90-day bill rate would be up at 4.00% by March 2014. That forecast was wound back to 3.3% in March, 3.2% three months later and is now down at 2.8%.
The good news for borrowers is that, asssuming things pan out as forecast, then home loan rates aren't likely to be going up any time soon either.