by Paul McBeth
In its latest analysis of the major banks, PricewaterhouseCoopers says the central bank's tougher liquidity requirements for lenders that will force them to source as much as three-quarters of their funding from retail deposits and long-term wholesale funds has underpinned the "brutally competitive manner in which the banks are targeting retail deposits."
"The banks are going head-to-head for domestic retail funding in order to aid compliance with the Reserve Bank's new liquidity policy," the financial services company said in its Perspective newsletter. "This has had the effect of keeping interest rates on deposits higher than may have been expected based on the official cash rate."
Customer deposits grew $2.5 billion in the second half of the last financial year, though this increased proportion of funding from retail clients is still lower than the 54% average since 2007.
"We believe the slow down in growth in customer deposits growth reflects the economic conditions in New Zealand over the last 12 months," the PwC report said.
The accounting firm predicts the customer deposit growth may benefit from the second tranche of the government's retail deposit guarantee scheme, which will allow firms to offer both guaranteed and non-guaranteed accounts while smaller companies and non-bank deposit takers from entering the extended scheme through higher fees.
"While the participation cost for the extended retail deposit guaranteed scheme will increase, we would not be surprised to see the take-up by the banks for this form of depositor protection insurance due to depositor demand, even though it should be unnecessary given a properly functioning marketplace," PwC said.
Paul is a staff writer for Good Returns based in Wellington.
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