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Wheeler drawn into Greens politicking, says bank returns still below GFC levels

Reserve Bank governor Graeme Wheeler has scotched claims by the Green Party that he has a bias in favour of the country's Australian-owned banks and defended statements saying the lenders' return on equity is still below pre-crisis levels.

Mr Wheeler, who delivers his maiden monetary policy statement on Thursday, released bank profitability figures given to the Greens, which he used to support comments before parliament's finance and expenditure committee that bank profits were "about average or below" other developed nations.

Greens co-leader Russel Norman accused Mr Wheeler of misleading parliament over the claim, which is not directly addressed in the RBNZ statement.

Mr Wheeler released charts showing New Zealand's banks' after-tax return on assets and equity between 2009 and 2001 was in the bottom half of OECD countries, excluding the euro-area.

Pre-tax returns show New Zealand lenders' returns in the top six for the period. The comparisons are not clean-cut with some countries shown as before tax, and others after tax.

"My response to the select committee represented my understanding of the information available at the time," he stays in a statement.

"Our analysis was completed after the hearing and we released to the Green Party in response to their request which followed the hearing."

The November 7 select committee hearing on the central bank's financial stability report was Mr Wheeler's first appearance before politicians and degenerated into a farce when the governor, his entourage and everyone else were cleared from the room so MPs could argue about whether they could seek more time after a late start.

Mr Wheeler rejected the Greens' claim the central bank is biased towards the Australian lenders, saying the bank "takes seriously its mandate from parliament to supervise the New Zealand banking system and does so without favour".

The Australian lenders' profitability has recovered on a return on assets basis, but was still below pre-global financial crisis levels as a return on equity, he says.

"That's partly because these banks are building up capital as part of the tougher Basel III regulatory requirements." 

(BusinessDesk)

Comments and questions
10

Why is there an assumption bank shareholders should eat lunch for free while shareholders of other companies contemplate possible Pike River/Feltex-like returns on and of capital?

Anyone can buy shares in the Australian banks... if you think the returns are good, go for it!

Ultimately at taxpayers' expense. This is the moral hazard that raises questions around profitability and how much such are genuinely achieved though efficent market force operation and how much through 'sweetheart' positioning on the back of regulation and so-called market stability. Market efficiency arguably comes through businesses getting cleaned out once and a while - not all, but those that either over-reach or become obsolete. But with the banking system, the taxpayer is like a trooper at Bighorn.

Why on earth would Mr Wheeler, or anyone else, take any notice of Russel Norman on any matters relating to business or economics?

Russel Norman shows his shallowness and naivety of business and finance, but shows his ability to play the man and not the ball. It will be a sad day for NZ if this avowed communist gets anywhere near the nation's Treasury benches.

"Shows his ability to play the man and not the ball" ... you would never do that, would you!

Get used to it, sunshine, he will be on the Treasury benchs unless Jonkey and his team get to grips with reality. The trading banks are gouging SMEs with punitive OD rates. Unfortunately for this red-neck conservative, Russel makes more sense Bill English. At least he understands my situtation.

It's about time someone reminded people that Dr Norman is, or was, a member of the Communist Party. I wonder how many of the 14% or so who support Greens know that? God help us if he ever became finance minister, which is his stated objective.

Norman is on to it. Wheeler is simply an apologist for the Aussie banks.

Crowd pleaser - inciteful not!