Suggestions that the trading banks are covering up their rough treatment of rural borrowers have been strongly denied by the body representing the country’s largest lenders.
The New Zealand Banking Association labelled as “outrageous” claims its members misled the Reserve Bank in their most recent reporting of credit availability to the rural sector.
A full 100% of banks reported credit availability to the rural sector as “about normal” in response to questionnaires sent out by the banking regulator in March.
But Federated Farmers said those results don’t match those of its own banking survey, covering roughly the same period, showing the number of farmers reporting dissatisfaction with their banks at the highest level since the survey began, in May 2015.
The previous Reserve Bank credit conditions survey in September showed 60% of banks reporting “about normal” credit availability to rural borrowers and 40% reporting credit had become “somewhat tighter”.
Federated Farmers national board member Richard McIntyre said that was also contrary to results from its own survey two months later which showed a record 26% of respondents saying they had come under “undue pressure” from their banks in the previous six months.
“I think it is being reported in a way that paints a rosier picture.”
McIntyre agreed that the mismatch in survey results appeared to coincide with calls from Federated Farmers and others from the middle of last year for a parliamentary inquiry into competition in the rural banking market.
Earlier results appeared to more closely match those in Federated Farmers own surveys. For example, throughout 2019 and 2020 the two surveys moved in lockstep as declining farmer satisfaction and increased reports of farmers coming under undue pressure from their lenders matched the banks’ own reporting of tighter credit to the rural sector.
Asked whether he thought the banks had airbrushed their more recent responses to distract from calls for an inquiry, McIntrye said he thought it “quite possible”.
“I don’t think these [survey results] paint a true picture, one that reflects what is going on.
“One of the things I would like to see come out of this inquiry is for the Reserve Bank asking for some more meaningful data from the banks to reflect what is actually going on.”
McIntyre said making banks report credit availability according to the riskiness of borrowers would be a good start.
“If you are a farmer that does not have very good cashflow at the moment and is on the margins from an equity point of view then credit is not available to you and that is where the change of bank sentiment has really moved over the past few years.
“But you can see how that doesn’t really fit into the reporting that the banks are sending into the Reserve Bank.”
NZ Banking Association chief executive Roger Beaumont dismissed any suggestion the banks had deliberately misreported lending conditions in an attempt to undermine calls for an inquiry.
“It is outrageous to suggest banks would mislead the Reserve Bank.
“Providing accurate data to the central bank for supervisory purposes is fundamental for banks to maintain their registration.
“There are a few assertions and opinions circulating about banking at the moment which may be influenced by the current state of the economy.
“Our banks welcome the opportunity, through the select committee inquiry, to provide clarity on the issues being raised.”
Parliament’s Primary Production and Finance and Expenditure select committees are still to set the terms of references for their inquiries.
