Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


New tools for central bank by mid-2013, says English

Reserve Bank to get new financial stability tools by mid-2013, English says

By Paul McBeth

Feb. 27 (BusinessDesk) - The Reserve Bank will get an expanded range of tools to shore up financial stability, including the ability to set loan-to-value ratios on residential mortgages and force banks to hold more capital against risky lending, by the middle of the year, Finance Minister Bill English says.

The Reserve Bank will consult on its proposals for the macro-prudential tools next month, and English expects to sign a memorandum of understanding on the tool-kit with governor Graeme Wheeler later this year, the finance minister said in a speech to the Auckland Chamber of Commerce today.

Proposals bandied about include forcing lenders to hold extra capital during credit booms, increasing capital in response to sector-specific risks, adjusting funding ratios to ensure more stable lines of cash, and to restrict high LVRs.

"In particular, we want to avoid a strong upswing in asset values and any unsustainable growth in borrowing well in excess of economic growth," English said. The tools "are not a replacement for interest rates as the principal tool of monetary policy, although the two policy frameworks will interact."

Wheeler has been under increasing pressure to introduce and use macro-prudential tools to take the heat of a bubbling Auckland property market and deliver looser monetary policy to take the steam out of the kiwi dollar, which recently traded at 82.57 US cents.

English today said there are expectations the tools will be used immediately to cool down the Auckland property market, but those decisions will stay with the Reserve Bank.

"The greatest influence on the housing market will remain interest rates and supply constraints created by the planning system," English said.

"Later this year, the government will have more to say about how the financial stability tools will work alongside policies on more flexible supply in the housing market and social housing reform," he said.

The speech comes as banks become more aggressive in trying to secure borrowers, with HSBC launching a three-year loan at 4.99 percent, the country's lowest rate at that term for at least a decade.

English also threw his weight behind the central bank's 'Open Bank Resolution' mechanism, which is designed to set out how much depositors and bond-holders will lose in the event of a bank falling over in order to avoid an
"unfair burden on taxpayers and a distortion of sound incentives to the financial system."

"The 'too big to fail' problem also represents a large contingent liability for taxpayers," he said. "We should do as much as we can to reduce these risks to the taxpayers, and hand more of the costs and incentives back to the financial system."

The upcoming budget in May will focus on building growth and investment to support more jobs and higher incomes, he said.

(BusinessDesk)


© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Crown Accounts: Government Ekes Out Six-Month Surplus Of $9M

The New Zealand government eked out a tiny surplus in the first six months of the fiscal year as growth in domestic consumption lifted the goods and services tax take, while uncertainties over the Kaikoura earthquake costs meant expenses were less than expected. More>>

ALSO:

Almost 400 Jobs: Shock At Cadbury's Dunedin Factory Closure

Workers at Cadbury in Dunedin are reeling after learning this morning that the iconic Cadbury factory is to close, with the loss of almost 400 jobs... “The company had reported it was doing well and this has come out of the blue,” says Chas. More>>

ALSO:

Transport: Boards Of Inquiry For Auckland Roading Projects

Boards of Inquiry have been appointed to decide on two significant Auckland roading projects in a move which will get a decision by the end of the year, Environment Minister Dr Nick Smith and Conservation Minister Maggie Barry announced today. More>>

ALSO:

Three Months On: Quake Reciovery In Kaikōura And Elsewhere

Three months after the magnitude 7.8 earthquake on 14 November, encouraging recovery progress is being made in affected communities. More>>

ALSO:

Jetstar, Qantas For Govt Transport: Government Still In Talks With Air NZ

The government is still negotiating with national carrier Air New Zealand in a cross-agency air travel contract that will add a number of new airlines to the list of approved flyers. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news