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

 

Banking Post-COVID-19 Requires A Long-term View

How the banking sector chooses to respond to the significant impact caused by the COVID-19 pandemic will have a major influence on how the financial system evolves over the next decade.

The pandemic has posed significant challenges to both our economy and the financial system as a whole. We expect it will take some time before we see a full recovery, Reserve Bank - Te Pūtea Matua Deputy Governor and General Manager of Financial Stability Geoff Bascand said in a speech delivered today.

“New Zealand’s financial sector has proved resilient to the dual health and economic shocks and indeed, supported the business and household sectors through strong business continuity arrangements, the accommodation of many customers through the restructuring of borrowing terms, and only a relatively modest tightening of lending standards.

“A financial crisis and ‘credit crunch’ on top of an economic crisis would be hugely disruptive for New Zealanders’ wellbeing. The ability of financial institutions to absorb shocks, accept risk and continue lending in the face of shocks is foundational to our regulatory framework.”

Banks entered the crisis having built up strong capital and liquidity buffers boosted by a number of years of favourable economic performance, and anticipation of the implementation of the Reserve Bank’s Capital Review. The Reserve Bank delayed implementing the review’s outcomes during the initial COVID-19 response, to allow banks to focus on supporting their customers, and the Reserve Bank remains committed to fully implementing the review’s outcomes no earlier than July 2021.

“Banks’ initial responses to the COVID-induced lockdown was strong. Banks stepped up and supported their customers with mortgage deferrals, liquidity facilities, and covenant relief. But a key determinant of the success of New Zealand’s economic recovery to come will be the willingness of banks to lend to productive, job-rich sectors of the economy. The banking sector could choose to hunker down and seek to ride out the storm until the good times roll around again. Or, it could continue to step up and play a crucial part in supporting New Zealand’s economic recovery,” Mr Bascand says.

“Now is the time for banks to drawdown prudently on their buffers to support their customers. Shareholders will have to be patient for longer-term payoffs, but this forward-thinking, long-term approach will stand bank customers, banks, shareholders, the financial system and Aotearoa in the best position.”

Beyond the immediate crisis, the banking sector must confront long-term low interest rates, and an eye to the future will also pay heed to emerging risks and structural disruption from accelerating digitisation and new forms of competition. Increasing internal investment, clarity of business models and customer focus, and strong risk management will be required. Managing customer, investor and regulator expectations in the face of persistent structural changes and an evolving risk environment will require strong organisational leadership and governance.

The COVID-19 crisis has reinforced the Reserve Bank’s focus on both resilience and risk management - which is evolving to be more attuned to the changing structures and dynamics in the financial sector, including the implications of cyber risks, FinTech, climate risks and the economy’s increasing reliance on payments systems stability. These longer-term structural changes in the sector highlight the importance of a regulatory system and perimeter that can adapt to non-traditional financial entities, which is a key consideration of Phase 2 of the Review of the Reserve Bank Act.

More information:

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Reserve Bank: Further Easing In Monetary Policy Delivered

Tēnā koutou katoa, welcome all. The Monetary Policy Committee agreed to expand the Large Scale Asset Purchase (LSAP) programme up to $100 billion so as to further lower retail interest rates in order to achieve its remit. The eligible assets remain ... More>>

Retail: Post-Lockdown Retail Card Spending Picks Up

The rise in retail card spending was boosted by sales of furniture, hardware, and appliances, Stats NZ said today. “For a third consecutive month, card spending on the long-lasting goods (durables) remained at higher levels than last year, after ... More>>


Contact: Business Drops, New Generation On Hold

New Zealand’s second-largest energy company Contact Energy (‘Contact’) released its full year financial results for the 12 months to 30 June 2020 (‘FY20’) this morning. More>>

Mining: OceanaGold Announces Receipt Of WKP Mining Permit

MELBOURNE, Australia, Aug. 6, 2020 /CNW/ - OceanaGold Corporation (TSX: OGC) (ASX: OGC) (the 'Company') is pleased to announce it has received the mining permit for Wharekirauponga ('WKP') on the North Island of New Zealand. ... More>>

ALSO:

Economy: COVID-19 Lockdown Has Widespread Effects On Labour Market

In the June 2020 quarter, the seasonally adjusted unemployment rate fell to 4.0 percent, down from 4.2 percent last quarter, while underutilisation rose, Stats NZ said today. More>>

ALSO:

NZ Post: New Research By NZ Post Shows Online Shopping Grew 105% In Alert Level 3

New research by NZ Post into how the COVID-19 response has impacted the way Kiwis shop online, shows online shopping increased 105%* when the country moved into Alert Level 3, and may have changed the way Kiwis shop permanently. Online spend peaked ... More>>

ALSO:

Antarctica NZ: Ice-Olation

Antarctica New Zealand is gearing up for a much reduced season on the ice this year and a very different deployment to normal! Before they head to one of the remotest places on the planet, all personnel flying south with the New Zealand programme will ... More>>

ALSO:

QV Valuations: July House Price Index Illustrates Market Resilience

According to the July 2020 QV House Price Index (HPI) results out today , property values recorded a marginal increase, up 0.2% over the month. This is somewhat of a turnaround from June, after the national index edged 0.2% lower. More>>

ALSO:

Property: Queenstown Rents Experience Biggest Drop In Seven Years

Rental prices in the Queenstown-Lakes district saw the biggest annual percentage drop in seven years after falling 28 per cent on June last year, according to the latest Trade Me Rental Price Index. Trade Me Property spokesperson Aaron Clancy said ... More>>

Seismology: The Quiet Earth

As many daily activities came to a halt during lockdown, the Earth itself became quiet, probably quieter than it has been since humans developed the technology to listen in. Seismologists have analysed datasets from more than 300 international ... More>>

RNZ: James Shaw Says Kiwibank, Not Ministers Should Decide On Investors

Climate Change Minister James Shaw says Kiwibank's decision to stop doing business with companies dealing in fossil fuels is the right one. More>>

ALSO:

FMA: Kiwis Confident Financial Markets Will Recover From COVID-19, Plan To Increase Investments

Despite the majority (60%) of investors experiencing losses as a result of COVID-19, the outlook on investing remains positive, according to a Financial Markets Authority (FMA) survey. Most Kiwis (71%) were optimistic that the pandemic will pass eventually ... More>>

FIRST Union: Warehouse Using Covid For Cover As Extensive Restructure Makes Everyone Worse Off

(FIRST Union comments on The Warehouse consultation and proposed restructure) 'Unfortunately the Warehouse have done the disappointing thing and used Covid-19 to justify a bunch of operational business decisions that will leave hundreds of workers without jobs ... More>>

ALSO: