Tripe: Banks exposed

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New Zealand banks are significantly exposed to housing and farming lending, and are significantly dependent on funding from overseas, according to Massey University’s director of banking studies.  

Tuesday, January 29th 2013, 10:59AM

by Susan Edmunds

He said: “New Zealand banks are indeed vulnerable to shocks, but they have taken some action to protect themselves against these. In most cases, they have capital well in excess of the required minimum, set by the Reserve Bank, and inclined to be conservative than what is specified internationally.”

An IMF report earlier this month suggested capital requirements for major lenders should be increased to offset that vulnerability.

But the  Reserve Bank was unconcerned. A spokeswoman said it was only a working paper, and the views were that of the author, not the official IMF view.

“Also worth noting, is the fact the working paper highlights the conservative approach the Reserve Bank has taken generally in its prudential regulation.”

The IMF’s working paper found ASB, ANZ, BNZ and Westpac  were vulnerable to a fall in commodity prices, which would affect farm loans, and a rapid slowdown in China or Australia which would put pressure on exports.

The nature of the economy meant a blow would likely come from multiple fronts, the IMF said.

The Reserve Bank spokeswoman said the bank was continuously monitoring areas such as capital requirements, the composition of bank funding and stress-testing in the context of local and global developments.

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