New Zealand’s four largest lenders do not face strong...

New Zealand’s four largest lenders do not face strong competition in the personal banking sector and the government should make it easier for new entrants, the country’s competition watchdog said on Tuesday.

The New Zealand Commerce Commission report outlined 14 recommendations including boosting capital for government-owned Kiwibank, the country's fifth-largest lender, lowering barriers to entry and ensuring open banking is fully operational by June 2026.

Commission Chair John Small said open banking - which involves banks making customer data available to third parties on request so customers can better shop around - was a key reform for the long-term, while a stronger Kiwibank would improve choice in the short term.

“We believe that the best prospect for driving change in the sector will come over time from accelerating open banking and ensuring that the regulatory environment better supports competition,” he said in a statement.

“In the shorter-term, we see the capitalisation of Kiwibank providing the sector with the disruptive maverick that’s currently missing. Longer-term, it is through open banking."

New Zealand's banking system is dominated by four large Australian-owned banks: Westpac Banking Corp (WBC) , Commonwealth Bank of Australia-owned ASB Bank (CBA) , National Australia Bank's Bank of New Zealand (NAB) , and Australia and New Zealand Banking Group (ANZ) .

Westpac, ASB Bank, Bank of New Zealand, and ANZ did not immediately respond to requests for comment.

The New Zealand Commerce Commission's report, commissioned by the previous government in 2023, said that improving competition required multi-faceted solutions.

“Overseas experience suggests that the scale and brand advantages of large banks and consumer inertia are difficult to overcome, even where open banking is well-established,” the report said.

New Zealand Banking Association Chief Executive Roger Beaumont said the report had provided useful insights into the New Zealand banking sector.

“We look forward to seeing how the government and regulators respond to the Commission’s recommendations,” he added. "We will assess which initiatives could involve an industry approach, and which ones banks will need to address individually.”