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Speaker 1: With me right now, we've got Jane TIBs Trainey, the

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Speaker 1: Herald's Wellington Business editor. Hello, Jenne, hey Heather. Now have

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Speaker 1: you seen the proposed changes to the deposit compost scheme

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Speaker 1: in the banking study?

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Speaker 2: I have. So the Commics Commission, one of its findings

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Speaker 2: recommendations to improve competition in the banking sector is for

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Speaker 2: Nikola Willis to put more emphasis on competition than financial

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Speaker 2: stability when she decides how this new deposit compensation scheme

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Speaker 2: is going to be funded. So for people listening, this

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Speaker 2: is a scheme that will take effect mid next year.

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Speaker 2: It means that if your deposit taker, your bank, your

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Speaker 2: credit union collapses, you'll get up to one hundred thousand

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Speaker 2: dollars of your money back at the moment. If it collapses,

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Speaker 2: you might get nothing back. So the thorny issue with

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Speaker 2: this is is that it's going to be funded by

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Speaker 2: deposit takers paying levies into a fund. The Comments Commission

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Speaker 2: reckons the levee should be flat. The Reserve Bank reckons

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Speaker 2: the lev should be risk based, so you know, risky

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Speaker 2: finance companies should pay more than a low risk bank.

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Speaker 2: Nicolah Lis needs to decide which way she's going to go.

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Speaker 2: So bit of a test coming up for Nicolohil is

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Speaker 2: there is the.

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Speaker 1: Thinking here that if it's risk based, you are not

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Speaker 1: going to put your money into the risky stuff because

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Speaker 1: it's going to cost your money. But if it's flat,

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Speaker 1: it just increases competition because it doesn't matter where you

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Speaker 1: put it, you're paying the same. Yeah.

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Speaker 2: Look, the thing is is that if the small players,

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Speaker 2: like the finance companies, they are risky. They are saying

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Speaker 2: they don't want to pay higher levees into this fund

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Speaker 2: to reflect the risk because they all hit their bottom lines,

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Speaker 2: it will hit their profitability. So that's saying look, government,

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Speaker 2: if you really care about competition and if you want

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Speaker 2: to support us to compete with the big banks, then

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Speaker 2: don't make the levees risk based. But the Reserve Bank

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Speaker 2: is saying, well, look, everything in the financial system is

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Speaker 2: risk based. I mean, like the pricing of risk is

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Speaker 2: at the very heart of how the finance system works,

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Speaker 2: and it's important because you know, it incentivizes good behavior

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Speaker 2: and avoids the creation of a moral hazard. So two

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Speaker 2: quite different schools of thought there. And I know it

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Speaker 2: sounds rather technical, but everyone knows that if your bank

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Speaker 2: call your finance company or whatever if they charged higher

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Speaker 2: levees to support this new insurance scheme that comes back

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Speaker 2: on us as consumers. So the way the government divides

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Speaker 2: the cost of that scheme. You know, it's just something

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Speaker 2: that is quite significant and will show you know how

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Speaker 2: much it puts away on competition versus on financial stability.

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Speaker 1: It's really interesting how there's heaps in there, you know.

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Speaker 1: Thanks so much, you know, to training The Herald's Wellington

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Speaker 1: Business editor.

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Speaker 2: For more from Heather Duplessy Allen Drive, listen live to

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Speaker 2: news talks'd be from four pm weekdays, or follow the

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Speaker 2: podcast on iHeartRadio