New Zealand promises banking shake-up after watchdog finds the sector lacks competition

New Zealand's government on Tuesday promised a shake-up of consumer banking after the country's watchdog said the sector lacked competition and suggested improvements including looking at ways to increase state-owned Kiwibank's capital.

The New Zealand Commerce Commission report released earlier found the country's four largest lenders, all owned by Australian banks — do not face strong competition in the personal banking sector.

It outlined 14 recommendations including boosting capital for Kiwibank, the country's fifth-largest lender, lowering barriers to entry and ensuring open banking - which involves banks making customer data available to third parties on request so customers can better shop around — is fully operational by June 2026.

The government had already asked Treasury to engage with Kiwibank's parent company Kiwi Group Capital on options for raising new capital, Finance Minister Nicola Willis said in a statement.

Options to boost capital included from New Zealand's voluntary government retirement saving funds, New Zealand investment funds and investment from everyday New Zealanders, she said.

Proposals would be taken to the government later this year.

Willis added she also intended to issue a new Financial Policy Remit for the Reserve Bank of New Zealand this year and in this it would be made clear that the government expected the central bank to support a more competitive banking sector.

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

New Zealand banks have total assets of NZ$700 billion ($428 billion), according to