Another capital hungry SOE

Jason Krupp at Stuff reports:

NZ Post says its balance sheet will have to wear the $100 million in capital Kiwibank needs to meet its regulatory requirements and replace an ageing banking system.

Testifying before Parliament’s commerce committee today, chairman Sir Michael Cullen said the postal service operator had requested funding from the Government to meet the capital needs of its bank subsidiary, but hadn’t received a definitive answer yet.

The board was operating on the assumption that no further funds would be forthcoming, which is “not surprising in the current situation”, Cullen said.

That meant the state-owned enterprise would have to provide the additional Kiwibank capital, with the lender not yet profitable enough to fund its own capital requirements.

If NZ Post and/or Kiwibank had some private shareholders then they would be able to raise capital without needing taxpayers to borrow money from overseas to fund a competitive risky enterprise.

We should learn the lessons of Solid Energy. Reduce or eliminate the risk to taxpayers.