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The Finance and Expenditure Committee has now delivered its "Final Report on Banking Competition". It follows last year’s Commerce Commission market study into personal banking, but this time the net was cast wider — rural banking, business lending, and Māori access to capital were all explicitly included.

At NZAB, we’ve been deeply engaged in this process. We made a formal submission to the Committee, we wrote openly about why we thought the inquiry was asking the wrong questions, and we’ve published widely on the reality of farm lending margins in New Zealand. So when the report landed, we asked the obvious question: did it deliver?

The answer is a mixed one. There’s some progress — in fact, several of the recommendations mirror what we called for. But there are also gaps, missed opportunities, and the lingering sense that, once again, farmers may not see any real change. At the end of this article we also discuss the most important takeaway for farmers.

Setting the Scene: A Banking Market That Wasn’t Working for Farmers.

New Zealand’s banking system is dominated by four Australian-owned giants: ANZ, ASB, BNZ, and Westpac, plus the even larger Dutch owned Rabobank. Together, they control over 90% of system assets and are very profitable businesses.

As we pointed out in our earlier blog “The Banking Inquiry is Asking the Wrong Questions”, this isn’t simply about whether banks are “too profitable.” The deeper issue is that farmers face some structural issues that work against them accessing competitive capital:

• Regulatory capital classifies farm debt as riskier than home loans, even though actual losses from farm lending are very low.
• Margins on farm lending are materially higher — often 1.0% to 1.5% above housing lending on average — and yet the risk justification for this is wafer thin. We wrote about this in Does Agri Lending Risk Justify the Extra Margins Charged?, and the conclusion was clear: the data doesn’t really support the margin difference.
• Smaller banks and non-bank lenders who might provide competition are hamstrung by regulatory barriers, capital requirements, and scale disadvantages.

So, the big question for us was whether the inquiry would move the needle on these structural problems.

What the Inquiry Got Right.

The Committee’s recommendations included several that line up directly with what we asked for:

1. Capital Settings Under Review

The report tells the Reserve Bank to review its capital settings, with a focus on risk-weighted asset (RWA) calculations and their impact on rural lending. It also goes further, recommending an immediate halt to the incremental capital increases currently being phased in.

This is exactly what we argued for in our submission: that the Reserve Bank’s one-in-200-year capital resilience test is overly conservative, and that it drives lending away from productive agriculture into housing.

Importantly, since the report was released, the Reserve Bank has already published an updated proposal. At first glance, it pares back some of the increases, but settings are still materially higher than pre-2019. In our view, it risks being underwhelming. We’ll be writing a dedicated article on this shortly.

2. Disclosure of Risk Margins

The report recommends that agricultural lenders should be required to formally disclose the specific factors they use when setting risk margins.

That’s progress, but we think this needs to include disclosure of actual lending loss data, not just provision levels (which are forward-looking estimates and don’t line up with actual losses). Only then can farmers and regulators line up whether the extra capital being applied to farm loans, and the higher margins being charged, are actually justified. Transparency on real loss experience is critical to prove whether farmers are truly “riskier”.

3. Level Playing Field for Smaller Lenders

The report acknowledges that smaller banks and non-bank deposit takers (NBDTs) are disproportionately burdened by regulation. It recommends the Council of Financial Regulators streamline compliance and lower barriers for new entrants, including fintechs.

Again, this echoes our submission, where we argued that the dominance of the existing lenders isn’t just about scale — it’s about structural advantages inadvertently created by the regulations put in place to protect depositors from loss.

4. Standardised Credit Information

The report recommends that banks move to a standardised loan application process across rural, business, and residential lending. This would include adopting common data formats and enabling digital, multi-bank applications.

If implemented properly, this could be genuinely transformative. Today, every farmer knows the pain of preparing finance applications: each bank asks for information in a different way, requiring hours of rework, duplication, and frustration. That inefficiency not only adds cost, it can also discourage farmers from engaging in the marketplace.

That said, we should be realistic: the large banks are likely to be able to continue using their internal risk models, meaning they will always apply their own overlays and analysis beyond the standard file. So while standardisation is a step forward, its biggest benefit is likely to be felt among smaller lenders and new entrants who don’t have those internal models and who rely more heavily on common credit formats.

Where the Report Falls Short.

Despite these positives, there are notable gaps and weaknesses.

1. No Real Farmer Empowerment

The report never once points out that farmers themselves can and should be active drivers of competition by being better prepared and more credit-ready.

This isn’t something government needs to fix. It’s actually an industry challenge and it comes down to upskilling, including the wider use of specialist advisory. Farmers who can present a clear, standardised, and bank-ready credit requests will have more options. They can negotiate better terms, attract more lenders, and reduce their dependence on a single bank relationship.

2. Kiwibank’s Missing in Action

Some submitters (ourselves included) suggested Kiwibank should step into rural banking. The report notes these calls, but Kiwibank itself confirmed it has no plans to enter rural lending.

While Kiwibank has been authorised to raise up to $500m of new capital, this will be directed towards retail and SME banking, not farms. As we wrote in our earlier blog, without a genuine disruptive entrant into rural finance, the Big Four’s position remains intact.

3. Monitoring Without Muscle

The Committee proposes six-monthly progress reports from regulators and banks. That’s fine, but history tells us government monitoring rarely leads to real change.

The Reserve Bank, Treasury, and MBIE will all “consider” adjustments. But unless the Government forces action, particularly on capital rules, the incentives for banks won’t change.

A Positive Shift Already Underway.

It’s worth noting, however, that we are already seeing a real improvement in bank appetite and competition for farm lending.

Margins are tightening, credit terms are loosening slightly, and we’re seeing banks pursue deals that six to twelve months ago they might have walked away from.  

But let’s be clear: this shift seems driven less by the inquiry itself and more by broader economics. Farming profitability in some sectors has improved, demand for credit in sectors like housing and business has eased, and banks are naturally looking more closely at opportunities in agriculture.

That doesn’t diminish the importance of the trend. In fact, it’s encouraging to see the pendulum swing towards agriculture. Farmers should acknowledge this moment and be ready to use it to their advantage. Competition is real when multiple lenders want your business.

What Farmers Can Do Right Now

If you take only one message from this process, it should be this: don’t wait for Wellington.

Farmers can take practical steps today to improve their position. Farmers can take greater control of the credit risk process by building a clear, bank-ready story. That means going beyond budgets and financials to cover the full spectrum: what funding is actually needed, business strategy, historical and forecast performance, industry outlook, governance, environmental and social factors, stress testing, security position, and repayment pathways. Pulling this together into one consistent request for funding allows farmers to engage multiple lenders, drive competition, and secure better outcomes. This also applies to access to non-bank capital including new investors, and farmers will have more options than ever.

This isn’t theory. We help clients everyday achieve access to competitive, stable capital with excellent interest rates, simply by being better prepared and creating choice. That’s competition in action.

The Next Big Shoe to Drop: RBNZ’s Capital Review

Finally, it’s worth noting that immediately after the inquiry’s report, the Reserve Bank announced their proposal for changes to capital risk-weighting rules. This will look directly at rural lending, Māori land, and SME loans.

For farmers, this is where the real regulatory battle will be fought. If risk weights are recalibrated closer to actual risk, the rural margin gap will naturally close. If not, we risk another decade of productive sectors subsidising the housing market.

We’ll be writing in detail about this capital review in our next article — and why it matters more than any select committee report.

Final Word

The banking inquiry is a step forward. It picks up many of the points we and others have been making for years. But it doesn’t deliver the full reset the sector needs. The reality is that meaningful change will require both farmers, banks and regulators to keep evolving — farmers by presenting stronger, more consistent credit stories, and regulators (and in turn banks) by recognising the genuine resilience of the sector.

At NZAB, we’ll keep pushing on both fronts — helping farmers engage with the debt market on equal footing and advocating for system settings that reward productive investment.