Reserve Bank capital review: decision date set
The Reserve Bank will make a final decision on its proposed new capital rules on December 5, a move that could reshape the banking sector in New Zealand.
Monday, November 11th 2019, 5:28PM
The RBNZ has confirmed the date for its final decision on whether to increase banks' capital buffers.
The central bank's proposals could force banks to increase risk weighted capital from 8.5% to 16%.
The proposals are designed to strengthen the New Zealand banking system and prevent the risk of another financial crisis impacting the country.
Yet the big four banks, likely to take the biggest hit from the new rules, have voiced opposition. Westpac believes they could add $6,000 a year to the average mortgage, as banks hike rates to pay for the capital buffer.
Investment bank UBS believes the new proposals could add more than $2 billion to New Zealand mortgages every year, and says loan rates could jump by 80 to 125 basis points.
The Reserve Bank proposals could force banks to increase their capital buffers by 20%-60%. The central bank estimates this could account for 70% of banks' profits over a five year transition period.
The controversial new rules are currently under consultation. The central bank will take the views of independent experts into consideration, as well as concerns raised by banks and financial commentators.
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