Deep dive needed into rural banking
Taranaki Federated Farmers welcomes the Government’s decision to hold an inquiry into rural banking but says it must be done properly.
Last week Finance Minister Nicola Willis announced an inquiry into banking competition that will look at rural banking.
Federated Farmers was now applying pressure to ensure the inquiry is done deeply and delivers, Taranaki president Leedom Gibbs said.
The farmer lobby and advocacy group had called for an inquiry because there were widespread and systematic challenges in the rural banking system and the Government needed to take a much closer look at what was going on, she said.
Concerns about banking and interest rates were the number one issue for farmers at the moment.
“We have a lot of local farming families who are under huge pressure this season. Some are struggling to make ends meet with rising interest rates and reduced incomes.”
Gibbs gave examples such as farmers getting charged a rate of interest higher than was offered to people in the personal banking market.
In the past, farmers could get a few months of paying interest only until their cashflow improved. They were no longer offered that option or were instead offered an overdraft at a higher rate, she said.
One Taranaki farmer who bought his farm four years ago knowing he would have to upgrade the effluent system was offered help from the bank. It was now saying no to the loan and he may have to sell his farm, Gibbs said.
“At a time [when] farmers are struggling, the banks are still recording record profits.
And that doesn’t sit well with me.”
Farmers struggling with low product prices, high interest rates and the weather were becoming increasingly frustrated with banks.
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 bank.
Taranaki King-country MP Barbara Kuriger said any inquiry would need to accept that rural banking needed a different set of parameters to other types of banking, such as personal or business.
Farmers were doing it really tough at the moment, especially in sheep and beef. But dairy farmers had also been struggling with interest rates and the weather, Kuriger said.
“And there are a number of farmers out there who have really struggled with their bank over recent times.”
Rabobank New Zealand chief executive Todd Charteris said there were a number of differences between personal and rural lending that accounted for the variation in interest rates.
These included the combination of a different risk profile, the need to apply individualised credit risk assessments to rural loans (which are more costly than standardised, often automated, residential loan assessments), and higher risk weightings.
Rabobank took a flexible approach to supporting clients during times of financial difficulty, he said.
An ANZ spokesman said its agriculture bankers, many of them farmers themselves, went to work each day to help those in the agricultural sector succeed.
If a customer was unhappy with the service, ANZ was committed to working with them to resolve their concerns promptly.