Featured Product

    RBNZ Updates Strategy for Macro-Prudential Policy in New Zealand

    July 01, 2019

    RNBZ announced that it has refreshed the strategy for using macro-prudential policy, six years after its implementation. On this topic, RBNZ also published a speech by Geoff Bascand, the Deputy Governor and General Manager of Financial Stability at RBNZ. In addition, the government is reviewing the role and powers of RBNZ as they relate to financial stability, including whether the macro-prudential framework remains fit for purpose.

    While speaking at a conference hosted by Otago University, Mr. Bascand examined how macro-prudential policy mitigates risks to the financial system, whether the macro-prudential policy of RBNZ has enhanced financial stability, how macro-prudential policy should be governed, and the approach of RBNZ to using the macro-prudential tools. He said, "financial stability is important for the well-being of New Zealanders and macro-prudential policy is a key line of defende for safeguarding financial stability. Our refreshed strategy on macro-prudential policy provides us with greater clarity on how we will use macro-prudential tools in the future and provides New Zealanders with the confidence they need that the financial system is in good hands.” When risks are heightened, RBNZ uses macro-prudential tools to complement other financial regulation such as capital requirements. This reduces the likelihood and severity of threats to the financial system and mitigates the adverse impact on the economy. 

    In the macro-prudential toolkit the most well-known tool is the loan-to-value ratio policy (LVR), which improves the resilience of mortgage loans. There are also capital and liquidity tools that build additional buffers for banks, putting them in a better position to keep lending to the economy if things take a turn for the worse. Mr. Bascand also said that the refresh to the strategy was informed by the experience using the LVR tool. “The Reserve Bank’s LVR restrictions have been successful in reducing some of the risk associated with high household indebtedness. Our analysis showed that as a result of introducing the LVR policy, resilience of the banking system has increased, while side effects have been limited, and that’s a good outcome.” Commenting on the outlook for LVRs, Mr. Bascand noted that further easing in LVRs is possible if risks decline, which requires continuing subdued growth in credit and house prices and banks maintaining prudent lending standards. To ensure that tools can be utilized when they need to be, RBNZ needs to maintain operational independence in macro-prudential policy, supported by transparent communication and clarity about its objectives.

     

    Related Links

    Keywords: Asia Pacific, New Zealand, Banking, Macro-Prudential Policy, Macro-Prudential Tools, Financial Stability, LVR, RBNZ

    Featured Experts
    Related Articles
    News

    APRA Publishes Approach to Regulating and Supervising GCRA Risks

    APRA published an information paper that sets out a more intensive regulatory approach to transform governance, culture, remuneration, and accountability (GCRA) practices across the prudentially regulated financial sector.

    November 19, 2019 WebPage Regulatory News
    News

    IAIS Publishes Application Paper on Recovery Planning

    IAIS published the final application paper on recovery planning, along with the resolution of comments on the draft application paper.

    November 18, 2019 WebPage Regulatory News
    News

    FSB Publishes Summary of November Meeting of RCG for MENA Region

    FSB published a summary of the November meeting of the Regional Consultative Group (RCG) for Middle East and North Africa (MENA).

    November 17, 2019 WebPage Regulatory News
    News

    EBA Single Rulebook Q&A: Second Update for November 2019

    EBA updated the Single Rulebook question and answer (Q&A) tool with answers to eight questions that relate to the Bank Resolution and Recovery Directive (BRRD) and the Capital Requirements Regulation and Directive (CRR and CRD).

    November 15, 2019 WebPage Regulatory News
    News

    FSI Examines Use of Red Team Testing to Enhance Cyber Resilience

    The Financial Stability Institute (FSI) of BIS published a paper that examines the contribution of red team testing frameworks toward enhancing cyber resilience.

    November 15, 2019 WebPage Regulatory News
    News

    FASB Delays Effective Dates for CECL, Leases, and Hedging Standards

    FASB issued two Accounting Standards Updates finalizing the delays in effective dates for standards on current expected credit losses (CECL), leases, hedging, and long-duration insurance contracts.

    November 15, 2019 WebPage Regulatory News
    News

    ESMA Updates Q&A on Securitization Regulation in November 2019

    ESMA updated questions and answers (Q&A) on the Securitization Regulation (Regulation 2017/2402).

    November 15, 2019 WebPage Regulatory News
    News

    HKMA Announces Finalization of Banking Liquidity Amendment Rules 2019

    HKMA issued a letter informing all authorized institutions that negative vetting of the Banking (Liquidity) (Amendment) Rules 2019 (BLAR) has now expired. Thus, the BLAR will now come into operation from January 01, 2020.

    November 15, 2019 WebPage Regulatory News
    News

    BCBS Consults on Revised Disclosures for Market Risk Framework

    BCBS launched a consultation on the revised disclosure requirements for the market risk framework for banks.

    November 14, 2019 WebPage Regulatory News
    News

    BCBS Consults on Disclosure Templates of Sovereign Exposures of Banks

    BCBS published a consultation on the voluntary disclosure templates related to sovereign exposures of banks.

    November 14, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4167