SYDNEY (Dec 9): New Zealand said on Monday that it had asked government-owned Kiwibank and the country's treasury to seek up to NZ$500 million (US$291 million, or RM1.28 billion) in capital from domestic pension funds and investment firms, in order to increase competition in the banking sector.

New Zealand's consumer watchdog had said in August that the country's four largest lenders — all owned by Australian banks — do not face strong competition in the personal banking sector.

Finance Minister Nicola Willis urged Kiwibank's parent company Kiwi Group Capital and the Treasury to liaise with potential investor groups to raise capital for the bank.

"If a private placement occurs, this would be an asset capitalisation, not an asset sale, as all funds raised would be for Kiwibank's future business growth," Willis said in a statement.

"In the long-term, the most accessible source of additional capital for Kiwibank is likely to be through a public share offering."

But Willis said no decision on an initial public offering will be made during the government's current term to 2026, as Kiwibank is expected to complete its current digital transformation by 2028.

She said the government agrees that before making any investment, institutional investors will require a clear option to sell shares.

"If an initial public offering is not approved at a later date, there could be an option for investors to sell their shares back to the (government) at an independently assessed fair value," Willis said.

Willis also expects the Reserve Bank of New Zealand (RBNZ) to place greater emphasis on banking competition across a range of its policies and actions, and proposed a revised financial policy remit and a detailed set of expectations for the RBNZ.

The RBNZ board welcomed the updated remit, and said it had engaged with the finance minister.

"We already have a detailed work programme in place, relating to increasing efficiency and competition," RBNZ board chair Neil Quigley said in a statement.

Uploaded by Liza Shireen Koshy