A small part of the $850 million record profit posted by the Bank of New Zealand (BNZ) today needs to be set aside to protect savers’ deposits in the future, said Green Party Co-leader Dr Russel Norman today.
Dr Norman was responding to the full-year profits posted by the BNZ, which announced a 22 percent increase in after-tax profits today to $850 million. New Zealand remains the only country in the OECD that has no deposit insurance to protect savers' funds should a bank fail.
“Our banks profit in the good times; they should set aside some money now to pay if things go wrong,” said Green Party Co-leader Dr Russel Norman.
“Every other country in the OECD protects savers’ deposits with deposit insurance.
“It’s time savers in New Zealand were given the same protections savers in Australia have banking with the same banks.
“Banks do fail. The BNZ failed the late 1980s and then again in the 1990s. National is leaving the taxpayer on the hook for another bailout as banks like the BNZ are too big to fail.
“Deposit insurance is a smarter alternative to a taxpayer bailout.
“Deposit insurance would require all banks to pay a small regular premium (based on their credit rating) to fund an insurance pool that’s used to protect small depositors should it fail. The safer the bank, the lower their premium.”
Bill English has consistently rejected deposit insurance saying that it is ‘difficult to price and blunts incentives for both financial institutions and depositors to monitor and manage risks properly’.
“Bill English seems to think New Zealand’s banks are the only banks in the developed world unable to manage and price risks properly. This is concerning,” Dr Norman said.
“Deposit insurance isn't designed to prevent bank failure; it's designed to protect small investors who don't have the ability to assess the risks their bank is taking with their savings
“Australia protects depositors' savings up to $250,000. Other countries have a lower threshold, typically around $100,000.
“We think $100,000 is a fair level of protection for New Zealand savers.
Link to Bill English’s quote on deposit insurance: http://www.beehive.govt.nz/release/maintaining-confidence-financial-system