Scrutiny of incentives for bank lending gets sidetracked

BNZ chief executive Dan Huggins says his bank’s “lived experience” is that farm loans are riskier than home loans. Source: BNZ

ANZ Bank New Zealand “has been described as a profitable building society,” parliament's finance and expenditure committee (FEC) chair Stuart Smith noted last week when Reserve Bank officials appeared before his committee.

Again this week, when the FEC continued its banking inquiry by quizzing Bank of New Zealand chair Warwick Hunt and chief executive Dan Huggins.

Green FEC member Chloe Swarbrick asked why BNZ's lending to farmers had declined while the bank's home lending now accounts for 56% of the portfolio.

Huggins response was straightforward that farmer demand for loans has been weak and that it also comes down to risk.

BNZ's “lived experience” has been that agricultural lending is more risky.