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History of the banking sector in New Zealand

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The history of the banking sector in New Zealand dates back to the early days of European settlement in the country. Over the years, the banking industry has played a vital role in supporting economic growth and development, providing financial services to individuals, businesses, and the government. This article explores the significant milestones and transformations in the history of the New Zealand banking sector.

Early banking in New Zealand

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Main articles: Union Bank of Australia, Bank of New South Wales, Bank of Otago, National Bank of New Zealand, New Zealand Banking Company, Bank of New Zealand, and Post Office Savings Bank (New Zealand)
seal of the Union Bank of Australia
seal of the Union Bank of Australia

The first bank to operate in New Zealand was the Union Bank of Australia, which opened its branch in Auckland in 1840.[1] The bank primarily served the needs of early European settlers and facilitated trade and commerce in the region. The first bank established in New Zealand was the New Zealand Banking Company that was established in 1840 in the Bay of Islands.

New Zealand Banking Company Act 1841
New Zealand Banking Company Act 1841

The Bank of New South Wales (now Westpac) followed Union Bank of Australia and establishing its presence in Auckland in 1841.[2]

The Bank of New Zealand (BNZ) was established in 1861 and became the government's banker. The BNZ played a crucial role in supporting economic activities such as infrastructure development and agricultural growth.[2]

The Bank of Otago was founded in 1863 and in 1873 was incorporated into the National Bank of New Zealand.

Maori Banking

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The Maungatautari Peeke was one of several banks set up by Māori in the decades after the New Zealand Wars to handle money received from land sales. The Kīngitanga (King Movement) operated at least two – the other was the Bank of Aotearoa.[3][4]

In 2018 the Maori council called for the establishment of Maori owned bank[5]

Trustee Savings Banks

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Main articles: Trust Bank (New Zealand), ASB Bank, TSB (New Zealand), Westland Savings Bank, and Eastern & Central Savings Bank

The five original banks were established under the Savings Bank Act 1858,[6] and were:

After the Second World War there was a huge increase in the number of regional trustee savings banks, with the following new banks opening:[13]

  • the Waikato Savings Bank (est. 1958) [14]
  • the Canterbury Savings Bank (est. 1962)
  • the Hawke's Bay Savings Bank (est. 1962)
  • the Manawatu Wairarapa Savings Bank (est. 1963)
  • the Bay of Plenty Savings Bank (est. 1964)
  • the South Canterbury Savings Bank (est. 1964)
  • the Wellington Savings Bank (est. 1964)
  • the Wanganui Savings Bank (est. 19??)

Some of these banks merged early on (e.g. in 1973 the 'Manawatu Wairarapa Savings Bank' merged with what was by then the 'Hawke's Bay & Gisborne Savings Bank' to form the 'Eastern & Central Savings Bank'[13]) and other renamed to reflect a change in focus (e.g. Dunedin Savings Bank became the Otago Savings Bank in 1964[13]).

Trust Bank was formed in 1988 by merging most of the trustee savings banks.

Creation of the Reserve Bank of New Zealand

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the coat of arms of the Reserve Bank of New Zealand
The coat of arms of the Reserve Bank of New Zealand

In 1934, the Reserve Bank of New Zealand was established as the country's central bank. Its primary objective was to regulate monetary policy, maintain price stability, and promote the stability and efficiency of the financial system. The Reserve Bank was granted the authority to issue and regulate currency, supervise banks, and manage foreign exchange reserves.[15]

Banking and the NZ Government

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Main articles: DFC New Zealand Limited, Kiwibank, and Post Office Savings Bank (New Zealand)

In 1867 the New Zealand government created the Post Office Savings Bank (New Zealand), which was rebranded as PostBank in 1987 and bought by ANZ in 1989.

In 1974 the NZ Government set up the Rural Bank. The bank was sold to Flecher Challenge Ltd in 1989 and sold again in 1992 to National Bank[16]

The Development Finance Corporation (DFC) of New Zealand was a state-owned investment bank that operated from 1964 to 1991.

In 2002 the government founded Kiwibank as a subsidiary of NZ Post. In 2016 47 percent of Kiwibank was sold to the New Zealand Superannuation Fund (25 percent) and the Accident Compensation Corporation (ACC) (22 percent). Subsequently, in 2022 the NZ government acquired full control of Kiwibank.

Deregulation and liberalization

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Main article: Countrywide Bank (New Zealand)

During the late 20th century, New Zealand underwent significant economic reforms, including the deregulation and liberalization of the banking sector. These reforms aimed to enhance competition, increase efficiency, and improve the overall financial system.[17]

In 1986, the New Zealand government removed exchange controls, allowing greater flexibility in foreign exchange transactions. The banking sector experienced an influx of foreign banks, leading to increased competition and a broader range of services for customers.[17]

One such example was Countrywide Bank (New Zealand), a subsidiary of bank of Scotland founded in 1987. The bank was subsequently bourght by National Bank in 1998.

HSBC was the first overseas bank branch to gain registration in New Zealand in 1987. In 2023 HSBC ended their retail banking operations in NZ.[18]

In July, 1987 Citibank (New Zealand Branch) (CBNA NZ) was granted a full banking licence and was designated as a registered bank.

Australian Parents

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Main articles: ANZ Bank New Zealand, ASB Bank, Bank of New Zealand, and Trust Bank (New Zealand)

By 2024 New Zealand, the banking sector was dominated by four large Australian-owned banks, which are responsible for 85% of bank lending. These banks and their parent companies are:

Consolidation and mergers

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The 1990s witnessed a wave of consolidation and mergers in the New Zealand banking sector. Several smaller banks merged with larger ones, resulting in a more concentrated banking industry. The BNZ merged with the National Bank of New Zealand in 1992, forming the National Bank of New Zealand Limited.[19]

In 1996, ANZ Banking Group acquired the National Bank, further consolidating its position as one of the largest banks in New Zealand. Other mergers followed suit, such as the merger of Trust Bank with Westpac in 1996 and the merger of Bank of New Zealand with National Australia Bank in 1998.[19]

The Small Banks

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Main articles: The Co-operative Bank (New Zealand), SBS Bank, and Heartland Bank

Originally founded in 1928 as the Public Service Investment Society, the Co-operative Bank was registered as a bank in 2011.[20]

The Southland Building, Land and Investment Society was created in 1869. It was registered as the SBS Bank in 2008.

The Heartland Bank was registered in 2012, following the merger of CBS Canterbury (Canterbury Building Society), Southern Cross, MARAC and PGG Wrightson Finance.

Technological advancements and digital banking

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Main article: Databank Systems

An early example of the use of IT in NZ banking was Databank Systems, set up in 1967 as a shared service used by a consortium of New Zealand banks. The company was sold to Electronic Data Systems in 1994.

The 21st century brought significant technological advancements to the banking sector. New Zealand banks embraced digital banking services, allowing customers to access their accounts, make transactions, and manage finances through online platforms and mobile applications. These digital innovations have provided greater convenience and accessibility for customers.[21]

Furthermore, the emergence of financial technology (fintech) companies has disrupted traditional banking models, offering innovative and streamlined financial services. Fintech startups in New Zealand have introduced services such as peer-to-peer lending, digital wallets, and blockchain-based solutions, challenging established banks to adapt and innovate.[22]

Banking Ombudsman Service

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The Banking Ombudsman Scheme in New Zealand was established by the New Zealand Bankers' Association in 1992.[23] Under the Financial Service Providers (Registration and Dispute Resolution) Act 2008, financial service providers became required to be part of an approved dispute resolution scheme.[24]

In its first 25 years, the Scheme assisted over 78,000 consumers and facilitated nearly $39 million in compensation.[25]

See also

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References

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  1. ^ "THE UNION BANK". The Riverine Grazier. New South Wales, Australia. 3 September 1937. p. 4. Retrieved 24 November 2018 – via National Library of Australia.
  2. ^ a b Clifford, Andrew (2017). New Zealand Trading Banks and Early Paper Currency. New Zealand: New Zealand Banknote Guild. ISBN 9780473396435. OCLC 1003122493.
  3. ^ "Only surviving Maungatautari Bank cheque issued". nzhistory.govt.nz. Retrieved 14 June 2024.
  4. ^ Clark, Te Kaapo; Tairi, Lyn (29 October 2020). "Te Ihingarangi: a history of the Karapiro and Maungatautari area". cambridgemuseum.org.nz. Retrieved 14 June 2024.
  5. ^ Hitchcock, Joshua (27 June 2019). "From Kiwibank to iwi bank: the argument for a Māori-owned bank". The Spinoff. Retrieved 14 June 2024.
  6. ^ "Savings Banks Act 1858 (21 and 22 Victoriae 1858 No 52)". www.nzlii.org. New Zealand Legal Information Institute. 1858. Retrieved 26 May 2024.
  7. ^ "ASB Bank | Business History | Timeline". Businesshistory.auckland.ac.nz. Retrieved 2015-08-30.
  8. ^ "Auckland Savings Bank opens for business". nzhistory.govt.nz. Retrieved 14 June 2024.
  9. ^ "History of". TSB Bank. Retrieved 2015-08-30.
  10. ^ "Dunedin Savings Bank | NZETC". Nzetc.victoria.ac.nz. Retrieved 2015-08-30.
  11. ^ "Community Trust of Southland | Community Trust of Southland". Ctos.org.nz. Retrieved 2015-08-30.
  12. ^ "The Hokitika Savings Bank | NZETC". Nzetc.victoria.ac.nz. Retrieved 2015-08-30.
  13. ^ a b c "Trust Bank NZ Ltd". The Community Archive. 2009-06-02. Retrieved 2015-08-30.
  14. ^ "Trust Bank Waikato (1987-1996)". The Community Archive. Retrieved 2015-08-30.
  15. ^ Singleton, John (2013). Innovation and Independence: The Reserve Bank of New Zealand. Auckland University Press.
  16. ^ "Rural Banking Corporation Ltd". The Fletcher Trust. Retrieved 9 June 2024.
  17. ^ a b Massey, Patrick (1995). New Zealand: Market Liberalization in a Developed Economy. Palgrave Macmillan. ISBN 978-1349239290.
  18. ^ Vaughan, Gareth (13 June 2023). "HSBC stops accepting new New Zealand retail banking customers, tells existing customers to 'start engaging with other financial services providers". www.interest.co.nz. Retrieved 19 November 2024.
  19. ^ a b Liu, Benjamin; Tripe, David (2003). "New Zealand bank mergers and efficiency gains". Journal of Asia-Pacific Business. 4 (4): 61–81. doi:10.1300/J098v04n04_05. S2CID 153734596 – via ResearchGate.
  20. ^ "New Zealand's newest registered bank unveiled". The New Zealand Herald. 26 October 2011. Retrieved 26 October 2011.
  21. ^ Tripe, David (2003). "Trends in New Zealand bank efficiency over time". Applied Econometrics and International Development. 3 (1) – via ResearchGate.
  22. ^ Ellinger, Eliahu P.; Lomnicka, Eva; Hare, Christopher; Hare, Christopher V. M. (2011). Ellinger's modern banking law (5 ed.). Oxford: Oxford Univ. Press. ISBN 978-0-19-923209-3.
  23. ^ Tripe, David (11 Mar 2010). "The banking ombudsman". Te Ara - the Encyclopedia of New Zealand. Retrieved 17 June 2024.
  24. ^ "Banking Ombudsman Scheme obtains Ministerial approval". www.goodreturns.co.nz. 3 September 2010. Retrieved 17 June 2024.
  25. ^ Parker, Tamsyn (22 July 2017). "Bank customers get $39m in payouts over 25 years". NZ Herald. Retrieved 17 June 2024.
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