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

    ESMA Releases Enforcement Priorities for 2019 Annual Financial Reports

    ESMA published a statement on the priorities that European enforcers will consider when examining the 2019 annual financial reports of listed companies.

    October 22, 2019 WebPage Regulatory News
    News

    EC Consults on Alternative Standardized Approach for Market Risk

    EC is consulting on a delegated regulation amending the Capital Requirements Regulation (CRR) with regard to the alternative standardized approach for market risk.

    October 21, 2019 WebPage Regulatory News
    News

    CPMI Report Examines Impact of Global Stablecoins

    This report by the G7 Working Group on Stablecoins finds that stablecoins, regardless of size, have implications ranging from anti-money laundering efforts across jurisdictions to operational resilience (including for cyber security), consumer or investor and data protection, and tax compliance.

    October 18, 2019 WebPage Regulatory News
    News

    BoE Announces Date for Publication of Stress Test Results for Banks

    BoE announced its plans to publish results of the full UK annual stress tests on December 10, 2019.

    October 18, 2019 WebPage Regulatory News
    News

    US Agencies Request Comments on Use and Impact of CAMELS Ratings

    US Agencies (FDIC and FED) are seeking information and comments from interested parties regarding the consistency of ratings assigned by the agencies under the Uniform Financial Institutions Rating System (UFIRS).

    October 18, 2019 WebPage Regulatory News
    News

    PRA Consults on Approach to Supervising Liquidity and Funding Risks

    In consultation paper (CP27/19), PRA published a proposal (CP27/19) to update the supervisory statement SS24/15 on the PRA approach to supervising liquidity and funding risk.

    October 17, 2019 WebPage Regulatory News
    News

    US Agencies Consult on Policy Statement on Allowance for Credit Losses

    US Agencies (FDIC, FED, NCUA, and OCC) are consulting on the policy statement on allowances for credit losses and on the guidance on credit risk review systems.

    October 17, 2019 WebPage Regulatory News
    News

    FSI Paper Examines Use of Suptech Initiatives by Financial Authorities

    The Financial Stability Institute (FSI) of BIS published a paper that examines the suptech developments by analyzing suptech initiatives of 39 financial authorities globally.

    October 17, 2019 WebPage Regulatory News
    News

    US Agencies Publish Notice to Extend Form FFIEC 102 for Three Years

    US Agencies (FDIC, FED, and OCC) published a joint notice regarding extension of the market risk regulatory report for institutions subject to the market risk capital rule (FFIEC 102).

    October 17, 2019 WebPage Regulatory News
    News

    ECB Publishes Recommendations on Euro Risk-Free Rates Transition

    ECB published a report, by private sector working group on euro risk-free rates, which contains recommendations, from a risk management perspective, on the transition to new risk-free rates.

    October 17, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4006