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

 

RBNZ plans bank stress testing to monitor sector’s health

RBNZ plans bank stress testing to monitor sector’s health in event of downturn

By Paul McBeth

May 14 (BusinessDesk) - The Reserve Bank is developing a stress testing framework for the nation’s lenders to gauge their health in the event of a downturn.

The measure became commonplace since the global financial crisis as bank regulators tested the individual strength of lenders in the event of another crisis, and New Zealand’s Reserve Bank wants to set up its own regime which it expects will “form a key component of the Reserve Bank’s prudential and financial stability framework,” it said in its six-monthly financial stability report.

The central bank is developing the initiative to assess the impact of emerging risks to the financial system, develop capability in identifying and responding to those risks, and provide prospective on the adequacy of lenders’ capital buffers, it said.

“As well as providing an indication of the resilience of these institutions in an economic downturn, the exercise is designed to strengthen the stress testing capability of these institutions,” the report said. “As capability grows, the Reserve Bank expects stress testing to extend beyond credit portfolios, and to become entrenched as a regular part of risk management process.”

Registered banks are already required to conduct internal tests, and subsidiaries of the major Australian-owned lenders have participated in the Australian Prudential Regulatory Authority’s regime.

The central bank’s report found New Zealand’s banking system was sound, with impairments on non-performing assets only just above the June 2006 low. The reduction in bad debt was largely in rural and commercial property sectors, while the housing sector continued to have the lowest share of non-performing loans.

Bank profitability was back to pre-GFC levels, largely due to the fall in impairment charges, and future earnings would “likely be influenced by how borrowers respond to the outlook for higher domestic interest rates.”

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Back Again: Government Approves TPP11 Mandate

Trade Minister Todd McClay says New Zealand will be pushing for the minimal number of changes possible to the original TPP agreement, something that the remaining TPP11 countries have agreed on. More>>

ALSO:

By May 2018: Wider, Earlier Microbead Ban

The sale and manufacture of wash-off products containing plastic microbeads will be banned in New Zealand earlier than previously expected, Associate Environment Minister Scott Simpson announced today. More>>

ALSO:

Snail-ier Mail: NZ Post To Ditch FastPost

New Zealand Post customers will see a change to how they can send priority mail from 1 January 2018. The FastPost service will no longer be available from this date. More>>

ALSO:

Property Institute: English Backs Of Debt To Income Plan

Property Institute of New Zealand Chief Executive Ashley Church is applauding today’s decision, by Prime Minister Bill English, to take Debt-to-income ratios off the table as a tool available to the Reserve Bank. More>>

ALSO:

Divesting: NZ Super Fund Shifts Passive Equities To Low-Carbon

The NZ$35 billion NZ Super Fund’s NZ$14 billion global passive equity portfolio, 40% of the overall Fund, is now low-carbon, the Guardians of New Zealand Superannuation announced today. More>>

ALSO: