(Bloomberg) -- The New Zealand government should consider increasing Kiwibank’s access to capital to turn it into a “disruptive competitor,” the antitrust watchdog said.

The country’s banking market currently has limited competition with the four major Australian-owned lenders appearing to be focused on maintaining profit margins, the Commerce Commission said Thursday in Wellington in its first competition study into the country’s personal banking services.

“In a well-functioning banking market, we’d expect to see strong competition driving innovation and choice for customers, rather than the price-matching strategies we see here in New Zealand,” Chair John Small said. “The lack of a disruptive force in our banking market means competition between the majors is sporadic and not sustained.”

Former Finance Minister Grant Robertson announced the inquiry last June following suggestions that the main lenders were making excessive profits at a time when New Zealanders were facing an increasing cost of living.

In draft recommendations, the Commission suggested that Kiwibank’s owner Kiwi Group Capital — which is 100% owned by the New Zealand government — consider increasing its access to capital to allow it to be a disruptive competitor.

Kiwibank currently holds about 5% of the bank market in New Zealand, while the four main players — Australia & New Zealand Banking Group Ltd., Westpac Banking Corp., Commonwealth Bank of Australia’s ASB Bank and National Australia Bank Ltd.’s Bank of New Zealand — control 90% of the market.

The commission also called for the Reserve Bank to review its prudential capital settings to ensure they are competitively neutral and smaller players are better able to compete.

The report recommended setting a clear deadline to have open banking — which allows financial data to be shared between banks and third-party service providers — to be fully operational by mid-2026.

The draft report is subject to consultation prior to a final report being published in August.

The new government is still considering a select committee inquiry into a wider range of banking issues, Commerce Minister Andrew Bayly said in a statement, welcoming the Commission’s report. 

“I am working with our coalition partners to determine any possible response including the option of the select committee inquiry, but will determine what actions to take following the release of the final report,” he said.

(Updates with Commerce Minister’s comment in 10th paragraph)

©2024 Bloomberg L.P.