Source: Federated Farmers
Waikato Federated Farmers are backing calls for an independent inquiry into rural banking – and they’re asking local MPs do the same.
“Farming family incomes, investment decisions and the buoyancy of the local economy are all impacted by bank lending decisions and interest rates,” Waikato Feds spokesperson Garry Reymer says.
“It’s too important an issue not to investigate to make sure bank tactics and profit-making in the rural sector are reasonable and fair.”
A select committee is currently considering whether an inquiry is warranted.
“Legitimate questions are being asked by farmers and they deserve answers. This should be a non-partisan issue that politicians from across the spectrum can get in behind and support,” Reymer says.
“Waikato farming families and businesses are watching every dollar at the moment. Costs are on the rise pretty much across the board, and interest costs and the attitude of banks is another significant concern and pressure point.”
Reymer was among agricultural leaders and others at a Waikato University Economic Forum earlier this year and he says a number of the expert speakers, including from business start-ups, covered issues around investment confidence, costs and access to capital.
“There is a bigger picture but there are definite flow-on effects to agriculture.”
An independent inquiry also needs to look into capital holding requirements the Reserve Bank puts on trading banks, to fortify banks against a potential one-in-200 year financial shock. This is a higher level of capital requirement than most of the rest of the world and banks here have claimed covering it requires an additional 0.5-1.2 percent on interest rates.
“With agricultural loans totalling $62 million, that’s an additional $310m-$720m in interest costs coming out of farmers’ pockets,” Reymer says.
“The Reserve Bank says the trading banks’ profit margins are too high; the trading banks say ‘nothing to look at here, it’s the Reserve Bank’s regulations’.
“They’re blaming each other and we need an independent inquiry to cut through all of the nonsense and get to the bottom of these issues,” Reymer says.
The Federated Farmers’ May 2024 Banking Survey showed the number of farmers satisfied with their banking relationship has nose-dived from 80% five years ago to just 51% today.
The survey also found that a record high number of farmers feel they have come under undue pressure from their banks.
Alarmingly, only one in five farmers feel they have been adequately supported by their banks during this time of high interest rates.
