Thursday, March 02, 2006

Why the NZ Government should not own a bank

In contrast, the problems of the BNZ were dealt with differently. Firstly in 1989, the bank required a capital injection its capital adequacy had fallen to 2.4% as a result of the previous year’s $648.8 million loss (Reuters Staff, 1989). The government were forced to temporarily advance an additional $200 million of preference shares to lift while the bank awaited the proceeds of a rights issue.

Again in 1990 problems arose - t
he day after the election the new government was told by the RBNZ and Treasury that the BNZ was technically bankrupt (Bolger J B, 1996). The government, who still owned a majority position in the BNZ, was forced to inject an additional $640 million of capital into the bank in order to keep it as a going concern.

Contrast this to the Governments position that the banks are gouging us and the only way to combat this is for them to provide the competition. Last time they managed to bankrupt their competitive vehicle. This time they are just cross subsidising with NZ post and $15 mil a year captial injections. No similarities?

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