Featured Product

    RBNZ to Reinstate Loan-to-Value Ratio Restrictions

    February 09, 2021

    RBNZ is putting in place more stringent loan-to-value ratio (LVR) restrictions to reduce financial stability risks posed by high-risk mortgage lending. RBNZ will reinstate, as of March 01, 2021, LVR restrictions at the same level they were set at prior to the onset of COVID-19 pandemic, with tighter restrictions taking effect on May 01, 2021. According to Geoff Bascand, the RBNZ Deputy Governor and General Manager of Financial Stability, this two-step process has been put in place in line with the operational capabilities of mortgage lenders. Meanwhile, RBNZ has also made available the frequently asked questions (FAQs) on LVR restrictions.

    RBNZ announced that, from March 01, 2021, LVR restrictions for owner-occupiers will be reinstated to a maximum of 20% of the new lending at LVRs above 80%. In addition, from March 01, 2021, LVR restrictions for investors will be reinstated to a maximum of 5% of the new lending at LVR above 70%. Then, from May 01, 2021, LVR restrictions for owner-occupiers will remain at a maximum of 20% of new lending at LVRs above 80%; also, LVR restrictions for investors will be further raised to a maximum of 5% of new lending at LVRs above 60%. The LVR restrictions do not apply to new residential construction.

    The RBNZ Deputy Governor said that LVR restrictions were removed in April 2020 to ensure that they did not interfere with the COVID-19 policy responses aimed at promoting cash flow and confidence. Since then, a rapid acceleration in the housing market has been witnessed. RBNZ is now concerned about the risk a sharp correction in the housing market poses for financial stability. There is evidence of a speculative dynamic emerging with many buyers becoming highly leveraged. Highly leveraged property owners, in particular investors, are more prone to rapid “fire sales” that potentially amplify any downturn. These financial stability risks exceed the situation at the time of the LVR consultation launched in December 2020, which has resulted in more restrictive policy settings. The consultation on the proposal to reinstate LVR restrictions was undertaken from December 08, 2020 to January 22, 2021. In due course, a full summary of submissions will be released, along with a Regulatory Impact Assessment.

     

    Related Links

    Keywords: Asia Pacific, New Zealand, Banking, COVID-19, Regulatory Capital, Credit Risk, Basel, LVR, RRE, RBNZ

    Featured Experts
    Related Articles
    News

    EBA Sets Out Standards for Pillar 3 Disclosures of ESG Risks

    The European Banking Authority (EBA) published the final draft implementing technical standards on Pillar 3 disclosures on environmental, social, and governance (ESG) risks.

    January 24, 2022 WebPage Regulatory News
    News

    EBA Proposes Guidelines on Remuneration Benchmarking, High Earner Data

    The European Banking Authority (EBA) proposed to update the guidelines on the data collection exercise on high earners and the remuneration benchmarking exercise under the Capital Requirements Directive (CRD).

    January 21, 2022 WebPage Regulatory News
    News

    MAS Issues Updates on Its Activities: Ravi Menon Becomes NGFS Chair

    The Network for Greening the Financial System (NGFS) announced the appointment of Mr. Ravi Menon, the Managing Director of the Monetary Authority of Singapore (MAS), as its new Chair for a two-year term.

    January 21, 2022 WebPage Regulatory News
    News

    CBIRC Issues Rules on Related-Party Transactions and Outsourcing Risks

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules on related-party transactions and outsourcing risks.

    January 21, 2022 WebPage Regulatory News
    News

    OSFI Issues Results of Pilot on Climate Risk Scenario Analysis

    The Office of the Superintendent of Financial Institutions (OSFI) published an update on the discussion paper that intended to engage federally regulated financial institutions and other interested stakeholders in a dialog with OSFI, to proactively enhance and align assurance expectations over key regulatory returns.

    January 20, 2022 WebPage Regulatory News
    News

    EC Issues Regulation on Adjustments to K-Factor Coefficients Under IFR

    The European Commission (EC) published a report summarizing responses to the targeted consultation on the supervisory convergence and the single rulebook in the European Union (EU).

    January 20, 2022 WebPage Regulatory News
    News

    BIS Tests CBDC with Banks; FIS Examines Tech Firm Licensing Regime

    The Bank of International Settlements (BIS) announced successful test integration of wholesale central bank digital currency (CBDC) settlement with commercial banks, as part of the Project Helvetia.

    January 20, 2022 WebPage Regulatory News
    News

    ECB Issues Opinions on Green Bonds Standard and CRR Proposals

    The European Central Bank (ECB) published its opinion on a proposal for a regulation on European green bonds, following a request from the European Parliament.

    January 19, 2022 WebPage Regulatory News
    News

    ESRB Explores Policy Response to Risks Arising from Digitalization

    The Advisory Scientific Committee (ASC) of the European Systemic Risk Board (ESRB) published a report that explores the expected impact of digitalization on provision of financial and banking services, and proposes policy measures to address the risks stemming from digitalization.

    January 18, 2022 WebPage Regulatory News
    News

    HKMA Consults on FIRO Code, Revises Policy on Foreign Exchange Risk

    The Hong Kong Monetary Authority (HKMA) is consulting on the draft Financial Institutions (Resolution) Ordinance (Cap. 628), or FIRO, Code of Practice chapter on liquidity and funding in resolution, until March 14, 2022.

    January 18, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7912