Kiwibank was  founded to meet a political debt that the then labour government had to a minor party. During this recession, housing prices have not contracted as much as they ought.

Most banks are borrowing locally — and lending carefully. We are in trade balance, finally.

However, the state owned and state run bank is borrowing in Europe. And Europe is likely to blow up/ From Bernard Hickey.

It subverts the Reserve Bank’s monetary policy. It encourages borrowing and discourages saving, by keeping term deposit rates lower than they otherwise would be.This helps push up the New Zealand dollar and restrain our export sector.The actions of the state-owned bank fly directly in the face of the government’s avowed policy of trying to encourage savings and exporting, while discourage borrowing and spending in the housing market.

via Bernard Hickey: Kiwibank’s foreign borrowing splurge – Business – NZ Herald News.

If Kiwibank continues down this path, they will be severely stressed when (not if) the European banks default and therefore all loans are called in. In the commercial world, they would go bankrupt.

And they should. We cannot afford to rescue banks, particularly ones that aer following moronic policies that break any rules of fiduciary duty.