“My view is it's entirely up to the government to work out what they want to do with regulations,” Westpac chief executive Catherine McGrath told TMM.
She acknowledged that the financial services industry has already spent most of the time and money required to implement CoFi, which is set to kick in from March 31, 2025.
McGrath acknowledged the CoFi regulations are principles-based rather than prescriptive and are about “making sure we're delivering great customer outcomes.”
Westpac wants to deliver such outcomes but “exactly how the regulations support that is entirely up to the regulators.”
McGrath says there have been improvements to the Credit Contracts and Consumer Finance Act (CCCFA) rules, but says that they are still “incredibly prescriptive” and that further changes are still needed.
The previous government has continually tinkered with the amended rules that first came into force from Dec 1, 2021 and which have plagued the mainstream banks ever since, even though their stated aim was at fly-by-night type fringe lenders, such as pay-day lenders.
“I think there are probably better ways to do it than the current form of legislation,” McGrath says.
She dismissed a suggestion that Westpac hadn't taken seriously the Commerce Commission's current inquiry into the competitiveness of personal banking services.
Westpac's submission was only 18 pages compared with ANZ Bank New Zealand's at 46 pages, ASB's at 48 pages and Bank of New Zealand's at 70 pages, and the other three banks commissioned independent experts to produce hefty pieces of analysis too.
McGrath says its “an important inquiry,” and that Westpac had wanted to suggest ways to improve the competitiveness of banks “to deliver for New Zealanders.”
However, like the other three major banks, Westpac said the market is already “highly competitive.”
Another piece of regulatory action that the Reserve Bank is likely to impose some time after April next year is debt-to-income-ratio restrictions (DTIs) on mortgage lending.
RBNZ already has loan-to-valuation ratio restrictions (LVRs) in place and former RBNZ official Ian Harrison has said the two tools effectively do the same job.
McGrath says she doesn't know what practical difference DTIs would make to Westpac's lending.
“The primary focus from our perspective, and what the Reserve Bank wants to achieve, is to make sure we're lending responsibly to customers in amounts they can affort through the lending cycle,” she says.
“I fell we've been doing a pretty good job” of lending responsibly.