Cabinet has agreed to a market study into competition in the banking sector for personal banking services to ensure the market is working well for New Zealanders.

Kiwis need to know they can trust their bank with their finances, says Finance Minister Grant Robertson.

'The cost-of-living is top of mind for many Kiwis and we need to ensure there's a competitive market among banks providing personal loans, mortgages, credit cards and other banking services so that people have confidence they are getting the best deal possible when doing their banking.

'There have been long standing concerns that the market is not working well for New Zealanders. Banks have consistently made high profits over a number of years and their returns have outperformed their peers in other countries."

Robertson says New Zealand's banking sector is dominated by a small number of big players.

"Four major banks make up around 85 per cent of the mortgage and other lending market, and hold a 90 per cent share of total bank deposits. Loans by smaller lenders are growing but remain small in comparison.

'There has not been an in-depth look into competition issues in New Zealand's banking for some time, and New Zealand lags other countries such as Australia and the UK into doing a detailed analysis into banking services."

The Minister says he wants to be clear this study is not about bank conduct and culture.

"The Financial Markets Authority and Reserve Bank carried out an investigation in 2018 into this issue which has already resulted in a number of measures to protect consumers."

This market study is the first step in understanding banking competition issues, says Commerce and Consumer Minister Duncan Webb.

'The Commerce Commission will focus on examining barriers to new competitors entering or expanding in the market, the introduction of innovative products and services and consumers' ability to switch between banks," says Webb.

'As part of the study, the Commission will examine banks' profitability and other financial measures to assess competition in the sector."

Webb says the study will be completed by the end of August 2024 and will determine any actions needed to make sure competition is working for bank customers.

'In the interim, the Commission is expected to release a preliminary issues paper in August this year. I expect this paper will describe the structure of the industry and provide early indications on the nature of competition. It will set a clear signal of direction for the study and may uncover discrete issues which the Government could take steps to resolve, ahead of the final report.

'Separately, we are getting on with our work on open banking and establishing a consumer data rights regime by releasing a draft Bill for consultation this week."

Open banking will put consumers in the driver's seat of how their data is used and shared.

'While consumers already share their data, this will allow people to do so in a safe and secure manner between trusted providers," says Webb.

'This will set rules and regulations for providers to follow in handling and securing consumer data and make the sharing of that data safer, faster and easier."