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Reserve Bank Governor Graeme Wheeler says statements he made to a select committee about bank profitability were based on limited information.
Earlier today Green Party co-leader Russel Norman accused Wheeler of misleading Parliament after he told the finance and expenditure select committee that the profits of New Zealand banks were "about average or below" most other OECD economies.
An Official Information Act request by the Green Party on the basis for Wheeler's claims showed that even once the banking sectors of troubled European Union economies were excluded, New Zealand's banking sector was the fifth most profitable in the OECD.
This afternoon the Reserve Bank issued a statement which did not directly address whether Wheeler's statement was wrong, but admitted he spoke before the figures it has since released were completed.
"My response to the select committee represented my understanding of the information available at that time. Our analysis was completed after the hearing and we released it to the Green Party in response to their request, which followed the hearing."
Wheeler said different measurement practices around the world meant that international comparisons of bank profit figures are not straightforward.
"Profits in the New Zealand banking system reflect relatively low levels of non-performing loans, and low cost-to-income ratios, compared with many other countries.''
He rejected Norman's claims that he was biased towards Australian banks.
"The Reserve Bank takes seriously its mandate from Parliament to supervise the New Zealand banking system, and it does so without favour.
"Australasian-owned banks emerged in better shape from the global financial crisis because of their more conservative management, and our economies benefit from that strength."
Norman said today the statements Wheeler made were untrue.
"The Governor was wrong to tell Parliament that our foreign-owned banks are only making average, or below average profit,'' Norman said.
"Our new Governor's complacency about bank profitability is concerning. His job is to regulate our banks, not be their champion."
This week Wheeler will be back before Parliament when he appears before the Finance and Expenditure Select Committee to present the quarterly Monetary Policy Statement. The central bank is expected to hold the official cash rate at its historic low of 2.5 per cent when it releases the review on Thursday.
Norman told Radio New Zealand he would ‘‘certainly’’ be bringing up the issue of the Reserve Bank’s claims about bank profits.
‘‘But I think the bigger issue is if the regulator of an industry has a bias towards that industry, and that’s the concern here, I’m not saying that’s true, but I’m concerned when he’s made these statements which don’t stack up.’’
Finance Minister Bill English played down the claims, saying the figures he had seen on bank profits squared with Wheeler's comments.
"The figures I've seen are pretty consistent with what Mr Wheeler said. This is just politics. The Greens are trying to get attention because they're competing with the Labour Party to be the economic spokesman."
- © Fairfax NZ News
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