Deposit war shows no sign of abating: KPMG

Over the past year banks have reduced their offshore funding to 38% from 39% a year earlier after the global financial crisis sapped their ability to tap international credit lines, according to the KPMG Financial Institutions Performance Survey. That works out at about $3 billion for every percentage point of movement, and KPMG's head of financial services Godfrey Boyce told a media briefing in Wellington that it forced the banks to offer attractive premiums.

"Retail money is now more than expensive that wholesale" with 90-day bank bills offered at 190 basis points above wholesale rates, Boyce said.

Though the banks have attracted money away from finance companies and fund managers, that there is not enough money for country's major lenders to keep attracting retail deposits.

"It's a challenge - we don't have that kind of wealth and it's not clear where the money's going to come from," Boyce said. "In this economy, a lot of money is in property, and fundamentally, New Zealanders like property and I don't think that's going to change."