New Zealand central bank rules increase capital requirements for commercial banks
Source: China Business News Release time: 2019-12-09
The Reserve Bank of New Zealand (Central Bank) recently announced new rules to increase capital requirements for commercial banks. This means that New Zealand's commercial banks need to increase their capital ratios to hedge against risks.
According to the new regulations, starting from July 2020, the four major commercial banks will gradually increase the capital ratio to 18%, and smaller banks will need to increase to at least 16%. The new regulations will have a seven-year transition period. At present, the average capital ratio of the new bank is 14.1%, and the minimum ratio is 10.5%.
The head of the Bank of New Zealand said that the capital requirements of the big banks are high, because the failure of these banks will have a serious impact on the national economy.
Under the new rules, banks can achieve their goals by selling shares or other financial means. But bankers said the new rules could cause banks to raise interest rates to continue paying dividends to shareholders.
ANZ Chief Economist Sharon Zorner said the move could have a wider impact on related interest rates and credit issuance, such as a rise in mortgage rates. West Pacific Bank senior economist Michael Gordon also said that the bank expects the mortgage rate to rise by 40 basis points after the implementation of the new rules and predicts that it may affect economic growth in the long run.