28-3-2012

REVIEW OF COOK ISLANDS BANKING SERVICES TO BEGIN NEXT MONTH

The Government is to undertake a special review of banking in the Cook Islands with a view to producing a long term strategy for the provision of banking services for the country’s economy. Minister of Finance and Economic Management Hon Mark Brown said that on a sustained basis the long term strategy will look to lower the cost of banking for businesses operating in the Cook islands; improve accessibility of banking for businesses and Cook Islands residents; provide the banking services necessary to support the major growth sectors of the economy; and minimise the need for Government financial support to achieve the above. Recommended by the Economic Taskforce last year, Minister Brown said the special review will be conducted in four phases, with the first phase to be overseen by Mr Sam Knowles who will arrive in the Cook Islands in mid-May. Mr Knowles is a former CEO of Kiwibank in New Zealand; and has held other senior positions including Chief Executive, Work Insurance Limited, Wellington NZ; General Manager at National Australia Bank, Melbourne; AustraliaGeneral Manager, Business Development and Subsidiaries, Bank of New Zealand, Wellington. Minister Brown said Financial Secretary, Richard Neves is currently working through the Terms of Reference for the review with the first phase to focus on identifying and agreeing the problems that need to be solved and evaluating the options to best address them. At the Economic Summit held in May last year the Economic Taskforce called for a special review into banking in the Cook Islands with the purpose of: • understanding the factors that influence interest rate setting in the Cook Islands • updating the regulatory framework in the banking sector • achieving a broader range of lending options for the market in a competitive environmentencouraging a savings-based economy • formulating a policy for BCI to be the CI Govt Bank of First Choice • stimulating lending to businesses entering the new economic development sectors Recent information provided at Pacific Financial Technical Assistance Centre meeting in Samoa showed the Cook Islands fared well against comparative rates in other Pacific countries, including the Solomon Islands, Samoa, Vanuatu, Tonga, PNG, Fiji, Cook Islands, Marshal Islands, Palau and Federated States of Micronesia. The average loan yield in the Cook Islands was 7.3 per cent, the lowest in the Pacific. The next lowest was Fiji with 8.7 per cent and the highest being the Solomon Islands with 14.8per cent. The average interest on deposits was highest in the Cook Islands at 4.1 per cent, with thenext highest being Tonga at 3.5 per cent, and the lowest being PNG at 1 per cent. The spread between savings and loans was 5.3 per cent in the Cook Islands, the lowest was Fiji at 4.6 per cent, and the highest was the Solomon Islands with 12.7 per cent. Finally, the net interest income to average assets was lowest in the Cook Islands at 3.3 percent.