Westpac still ‘government’s main bank’

WESTPAC has retained the bulk of the government banking contract, following a tendering process which dragged on for years.

Yesterday, Finance Minister Bill English and Economic Development Minister Steven Joyce said six banks had been given slices of the lucrative all-of-government banking services contract.

But, by far, the key element of the contract – Crown transactional banking services – was won by incumbent Westpac.

For months, banking sources have indicated that Westpac had won the core of the contract, as the Beehive had shown little appetite for change.

Under the terms deal, 35 core of the eightyear government agencies are required to use Westpac. Such is the contract’s volume that one source claimed it enabled Westpac to effectively determine the timing of payment settlements between New Zealand banks.

In 2011, Prime Minister John Key said there would be a tender for the contract, which was first awarded to Westpac in 1989.

At the time, the Government was reportedly concerned that the cost of tendering the project could be more than any possible savings, but yesterday Joyce said officials had negotiated $120 million in ‘‘negotiated price benefits and innovation commitments’’.

The contract had three smaller elements – foreign exchange, payment services and card services. Those components were split between Westpac and the other three major Australian-owned banks – ANZ, ASB and BNZ – as well as Citibank’s New Zealand business, and state-owned Kiwibank.

‘‘It has been more than 25 years since government banking services have been put out to tender. Over this time, there has been considerable evolution in the banking and financial services sector,’’ English said.

‘‘The new contracts will deliver cost savings for government agencies and all New Zealanders. They will ensure banking services are fit for purpose.’’

Westpac said the win meant it remained ‘‘the government’s main bank’’, extending its relationship with the Crown to more than 30 years. It noted that it was the only bank which had won elements of all four parts of the contract.