Richard Prebble on the BNZ buyback: owing any bank is madness

Added: 2026-05-21

[00:00:00]And then all the wheels came off after that.

[00:00:03]Yeah, well, you probably did, too.

[00:00:05]And then the wheels came off after the share market collapse, obviously, as you know. And then David Long decided to pause and have a cup of tea.

[00:00:13]Um up until then, though, you were in charge of the privatization program and the Bank of New Zealand was one of those.

[00:00:21]Can you tell me what the theory was in terms of privatizing the Bank of New Zealand and why we didn't need a bank anymore?

[00:00:29]Okay. Well, the first one is that while I was a minister in charge of the uh privatization of some of the government's trading activities, BNZ was always a Minister of Finance's responsibility. So, BNZ never reported to me and no, I I never got the opportunity to do a privatization.

[00:00:51]Uh Roger Douglas um did come to the caucus and say that he had been looking at the BNZ and decided it was a very risky uh enterprise and that he didn't think that politicians had the skills to run a bank and that he recommended to the caucus that the BNZ be privatized. Um Jim Anderton got up, made a speech saying that it was a jewel and it should be kept.

[00:01:26]Uh Jim Anderton won.

[00:01:28]Uh the BNZ was kept. Then um during the 1990 election, it campaign or just after, it was announced that the BNZ was in because of poor lending, poor governance, was in very serious financial problems and needed an immediate injection of capital of around about a billion dollars, which may not sound much today, but a billion dollars used to be a lot of money in 1990. I think Ruth Richardson's still not forgiving us.

[00:02:02]>> [clears throat] >> Interestingly, from the viewers' point of view, uh as a cabinet minister, the BNZ had not informed the cabinet of any problems. They hid the situation right up to the election. David Caygill as the finance minister was basically the caretaker minister by the time when he got that the news.

[00:02:26]He thought constitutionally, and he is correct, that he couldn't do anything about that, and it was going to be either his problem or or the National Party's uh to solve after the election. But, um uh can I make another point to your viewers? Sure.

[00:02:40]>> Banking is very risky.

[00:02:43]Banks basically The reason they put those big buildings up to make you think that they're solid is that they're not.

[00:02:50]They are taking short-term deposits, which you can demand back immediately, and then lending it out on mortgages up to 30 30 years. Um borrowing short, lending long, very risky.

[00:03:02]And the history of capitalism, and the history of New Zealand, uh is is bank failures. In fact, the BNZ failed not just once, uh but twice, been bailed out by the taxpayer.

[00:03:13]Um Having an Aussie bank >> I mean, since the Australians have taken it over, though, they've done extraordinarily well, you'd have to say. The Australian banks um nation It was sold in 1992, finally, to the National Australia Bank, or they purchased the Crown's 57% at the time.

[00:03:32]Sold it for uh God, what have I got to hear about 1.5 billion dollars? Yeah, I think that's what it was. It was valued then.

[00:03:39]And they've made an awful lot of money.

[00:03:40]I think they've made I just I was having a look, Richard.

[00:03:44]They've made about 10.5 billion dollars in dividends.

[00:03:50]>> about that. The the the The BNZ now makes about a about a billion a year.

[00:03:57]It hasn't cost the taxpayer a cent since it's been privatized. And the BNZ though last year it was actually making some provisions for some losses to do with their new software. But the BNZ normally pays hundreds of millions of dollars tax every year.

[00:04:15]But when you look at New Zealand banking in New Zealand, when people compare New Zealand and other countries, they forget that we're actually a very risky country to be banking in.

[00:04:26]The banks actually because we don't save money, they borrow the money overseas.

[00:04:31]So they take all the exchange rate risk and then they lend it out on mortgages in New Zealand.

[00:04:37]Very risky.

[00:04:39]And if banking was so fantastic in New Zealand, then the National Bank which was the British owned bank wouldn't have quit in 2003.

[00:04:48]I mean, they looked at New Zealand and they concluded that this is a risky place.

[00:04:53]And when you make risky loans, you always get a higher you always ask for a higher rate of return. We're a risky place, the banks ask for a higher rate of return. And even there the Westpac couple of years ago published the fact that they were reviewing whether they wanted to stay in New Zealand. And that's despite the fact that New Zealand was so profitable. So I'd have to say to you if foreign owned banks think that we are a very risky place to run a bank, why on earth should any politician put you and I at the risk of having to fund a bank?

[00:05:35]Incidentally the BNZ now is probably worth at least 20 billion dollars.

[00:05:43]Um We've got a deficit of 9 billion.

[00:05:47]So the 20 billion would have to be borrowed.

[00:05:49]That's another 20 billion, but a 20 billion that can't be spent on hospitals, can't be spent on education.

[00:05:56]Um It's 20 million we're just putting in into a bank. And where is the evidence that um state-owned banks are any better than private banks when it comes to interest rates and the like?

[00:06:09]And Winston says he wants to do this increase competition, but how does reducing the number of banks by one, cuz he's going to merge it with Kiwibank? I mean, how does that make um any sense? The The The proposal's lunacy. I know a lot of people are just going to dismiss it saying that all politicians don't mean what they say.

[00:06:33]Um it's my view that it I know it's scary, you should always assume politicians do mean what they say. And that Winston really is going to spend 20 billion dollars buying a bank back from from the um from the Australians. God.