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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[edit]

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]

During the 19th century, other banks emerged, including the Bank of New Zealand (BNZ), which 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]

Trustee Savings Banks[edit]

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,[3] 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:[9]

  • the Waikato Savings Bank (est. 1958) [10]
  • 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'[11]) and other renamed to reflect a change in focus (e.g. Dunedin Savings Bank became the Otago Savings Bank in 1964[12]).

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

Creation of the Reserve Bank of New Zealand[edit]

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.[13]

Deregulation and liberalization[edit]

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.[14]

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.[14]

Australian Parents[edit]

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

In 2024 New Zealand, the banking sector is 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[edit]

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.[15]

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.[15]

Technological advancements and digital banking[edit]

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.[16]

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.[17]

See also[edit]

References[edit]

  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. ISBN 9780473396435.{{cite book}}: CS1 maint: location missing publisher (link)
  3. ^ "Savings Banks Act 1858 (21 and 22 Victoriae 1858 No 52)". www.nzlii.org. New Zealand Legal Information Institute. 1858. Retrieved 26 May 2024.
  4. ^ "ASB Bank | Business History | Timeline". Businesshistory.auckland.ac.nz. Retrieved 2015-08-30.
  5. ^ "History of". TSB Bank. Retrieved 2015-08-30.
  6. ^ "Dunedin Savings Bank | NZETC". Nzetc.victoria.ac.nz. Retrieved 2015-08-30.
  7. ^ "Community Trust of Southland | Community Trust of Southland". Ctos.org.nz. Retrieved 2015-08-30.
  8. ^ "The Hokitika Savings Bank | NZETC". Nzetc.victoria.ac.nz. Retrieved 2015-08-30.
  9. ^ "Trust Bank NZ Ltd". The Community Archive. 2009-06-02. Retrieved 2015-08-30.
  10. ^ "Trust Bank Waikato (1987-1996)". The Community Archive. Retrieved 2015-08-30.
  11. ^ "Trust Bank NZ Ltd". The Community Archive. 2009-06-02. Retrieved 2015-08-30.
  12. ^ "Trust Bank NZ Ltd". The Community Archive. 2009-06-02. Retrieved 2015-08-30.
  13. ^ Singleton, John (2013). Innovation and Independence: The Reserve Bank of New Zealand. Auckland University Press.
  14. ^ a b Massey, Patrick (1995). New Zealand: Market Liberalization in a Developed Economy. Palgrave Macmillan. ISBN 978-1349239290.
  15. ^ 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.
  16. ^ Tripe, David (2003). "Trends in New Zealand bank efficiency over time". Applied Econometrics and International Development. 3 (1) – via Researchgate.
  17. ^ 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.

External links[edit]

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