What do New Zealand bank customers understand about the risks of dealing with foreign and New Zealand owned retail banks? : a thesis presented in partial fulfilment of the requirements for the degree of Master of Management in Banking at Massey University

Abstract

This research has sought to develop an in-depth awareness of what New Zealand banking customers understand about the potential risks of dealing with foreign-owned retail banks, relative to those that are New Zealand owned. For the purpose of this study, a mail-out questionnaire was developed in joint collaboration with Xiaojie Zhuang, a Master's research student in the Department of Finance, Banking and Property at Massey University (Palmerston North). Using assistance by way of a Reserve Bank of New Zealand grant, the questionnaire was distributed to 2250 randomly selected persons throughout New Zealand. Overall, the key results showed that most respondents have a reasonable understanding of which institutions are foreign or locally owned. It also found that the most important risks facing banks at present are foreign exchange risk (a bank's inability to hedge its foreign currency exposure) and credit risk, (a bank's inability to provide sound grounds for lending). It found that banking ownership, whether it is foreign or local, does not change the way in which New Zealand banking customers perceive these risks. This study found that the majority of respondents felt that, while foreign-owned banks may reduce market profitability, they do not detract from the stability of the New Zealand financial system.