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Capital requirements a risk to growth: ANZ

The Reserve Bank's proposals to force banks to keep extra capital could be a "significant headwind" to the economy and reduce the availability of credit, according to ANZ economists.

Tuesday, April 23rd 2019, 12:47PM

The RBNZ's controversial proposals, designed to make the banking system more stable, will force the big four lenders to boost capital ratios by 12%-16% over the next five years. But ANZ, in its latest assessment of the market, says the rules could have an adverse impact on economic growth and lending in New Zealand.

ANZ economists, led by Sharon Zollner, cite the proposals as a key "risk to growth" in their latest report. "Should the RBNZ proceed with its proposal to increase bank’s capital requirements by such a large amount, difficulty obtaining credit (particularly for the relatively risky agricultural and business sectors) could become a significant headwind."

ANZ's warning comes as major banking institutions predict a negative outcome for Kiwi borrowers. The capital rules are expected to force banks to raise interest rates to maintain profit margins. UBS believes investment banks face a $21 billion shortfall and predicts Kiwis will be forced to pay $2 billion extra on top of their mortgages each year.

The bank also reflected on last week's CPI inflation numbers, which showed a 0.1% q/q increase, lower than the RBNZ expected. ANZ says the economy is "shedding momentum", and believes "extra monetary stimulus shouldn’t be far away".

ANZ has downgraded its near-term outlook for the economy, but believes OCR cuts in August, November, and February next year will "support a gradual recovery". 

 

Tags: ANZ OCR OCR forecasts Reserve Bank

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Lender Flt 1yr 2yr 3yr
AIA 4.55 3.19 3.19 3.49
AIA Special - 2.69 2.69 2.99
ANZ 4.44 3.15 3.25 3.85
ANZ Special - 2.65 2.75 3.35
ASB Bank 4.45 3.19 3.19 3.49
ASB Bank Special - 2.69 2.69 2.99
Bluestone 4.44 4.44 4.44 4.44
BNZ - Classic - 2.65 2.69 2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.25 3.29 3.59
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union South 5.65 4.75 4.75 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 4.35 4.45 -
HSBC Premier 4.49 2.60 2.65 2.80
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 3.99 2.58 2.68 2.79
Kainga Ora 4.43 3.29 3.39 3.85
Kiwibank 3.40 3.40 3.54 4.00
Kiwibank - Capped - - - -
Kiwibank - Offset - - - -
Kiwibank Special 3.40 2.65 2.79 3.25
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Lender Flt 1yr 2yr 3yr
Resimac 3.49 3.45 3.39 3.69
SBS Bank 4.54 3.29 ▼3.19 ▼3.49
SBS Bank Special - 2.79 ▼2.69 ▼2.99
The Co-operative Bank - Owner Occ 4.40 2.79 2.79 3.39
The Co-operative Bank - Standard 4.40 3.29 3.29 3.89
TSB Bank 5.34 3.59 3.49 3.79
TSB Special 4.54 ▼2.65 2.69 2.99
Wairarapa Building Society 4.99 3.75 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.65 2.69 2.79
Median 4.55 3.22 3.22 3.44

Last updated: 3 July 2020 8:15am

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