SYDNEY (Reuters) - New Zealand said on Tuesday it would examine the profitability of the country's banks and investigate whether competition in the sector was working well for consumers.
The banking sector is dominated by four banks making up around 85% of mortgage and other lending, and 90% of deposits, government data showed. Loans by smaller lenders have been rising but remain small in comparison.
"There have been long standing concerns that the market is not working well for New Zealanders," Minister of Finance Grant Robertson said in a statement.
"Banks have consistently made high profits over a number of years and their returns have outperformed their peers in other countries."
New Zealand's four largest banks - ANZ Bank New Zealand, ASB Bank, Bank of New Zealand and Westpac New Zealand - are owned by Australia's "Big Four" banks.
Robertson said the government aimed to set up a more competitive market for personal loans, mortgages and credit cards so consumers get the best deal as households struggle with higher living costs.
"There has not been an in-depth look into competition issues in New Zealand's banking for some time, and New Zealand lags other countries such as Australia and the UK into doing a detailed analysis into banking services," he said.
But Robertson said the investigation will not check on the conduct of banks and culture.
It will focus on whether barriers exist for new competitors entering or expanding in the market, the introduction of innovative products and services, and consumers' ability to switch between banks.
The government aims to finish the probe by August 2024 and will then determine whether any action is needed.
The New Zealand Banking Association said it "will engage constructively" with the government's move.
"We believe the enquiry will ease any concerns in the community about competition and innovation in the banking industry," said association CEO Roger Beaumont.