The New Zealand Bankers’ Association today welcomed the conclusion of the Reserve Bank’s review of how much capital New Zealand’s banks should hold.
“Today’s announcement provides our banks with certainty on the amount and type of capital they will need to hold in future, and brings an end to a robust consultation,” says New Zealand Bankers’ Association chief executive Roger Beaumont.
“We recognise that these decisions conclude the consultation and our banks will work constructively with the Reserve Bank to implement the new capital requirements.
“We are pleased the Reserve Bank has engaged with a wide range of stakeholders and made some changes to its original proposal. In particular we acknowledge the longer implementation timeframe of seven years instead of five, which commences in July 2020.
“We’re also pleased to see a recognition of the differences between the larger and the smaller banks.
“Today’s announcement will have an economic impact and each bank will now consider the implications for their business and customers, and will be developing their own commercial response.
“Our banks will continue to work closely with the Reserve Bank on the detail of today’s decisions to ensure a smooth implementation.
“We support a strong and stable banking system that can withstand significant shocks.
“We also acknowledge the Reserve Bank for encouraging a valuable public debate on this issue and for responding to feedback,” Beaumont says.
ENDS
New Zealand Bankers’ Association chief executive Roger Beaumont said banks worked closely with any agricultural customers who were experiencing financial issues.
A report commissioned by bank lobby group the New Zealand Bankers’ Association, heavy on criticism of the capital proposals, argued the potential benefits of appealing prudential regulatory decisions on their merits are large.
The Bankers Association says lenders work closely with farmers and it points to the low number of mortgagee farm sales – fewer than 10 a year out of 52,000 farms across the country.
They also issued a statement, saying that bank conduct had improved over the last 10 years, with an increased focus on customer outcomes.
Ministry of Business, Innovation and Employment
In a submission, the NZ Bankers’ Association (NZBA) said it agrees and supports the objective of maintaining a sound banking system and guarding against banking crises, but argues that NZ’s major banks are already well capitalised.
Reserve Bank of New Zealand
“Our banks are profitable because they’re very efficient compared to similar banks around the world. They manage their costs very well. Another factor is that they did relatively well through the global financial crisis. None failed or were bailed out by the government, unlike in Europe and the US where they recovered their profitability more slowly from a negative base following the crisis. Our banks’ profits dropped post-crisis and recovered more quickly in parallel with other countries with stable banks, like Canada and Australia.”
Roger Beaumont said New Zealand banks were strong. “There’s a couple of reasons for that. They are well capitalised and they’re very good at managing their costs, which makes them very efficient and helps explain their returns on equity.”