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Non-banks may face LVR speed bumps

Non-banks could one day be subject to loan to value ratio restrictions like the major banks, a consultation document from the Reserve Bank suggests.

Tuesday, July 9th 2019, 4:39PM 2 Comments

Geoff Bascand

Phase two of the review of the Reserve Bank Act is underway, and the central bank says LVRs could be applied to non-bank deposit takers in the future.

A recent consultation document, released as part of the review, states: "The Reserve Bank’s power to apply LVRs is currently contained in the powers to regulate banks in the Reserve Bank Act. While lending standards could continue to be empowered alongside other prudential controls over banks, an alternative could be to make lending standards applicable to all relevant lenders (even if they do not take deposits)."

The RBNZ says current LVR restrictions "could be undermined" if non-banks "are willing to offer the loans that the Reserve Bank has restricted". 

The central bank added: "In many other countries, lending restrictions are applied to all lenders by default, rather than simply to deposit takers, but it would be a significant change in New Zealand."

The Reserve Bank said it may look to "retain the option" of extending LVRs to non-banks. 

The central bank is weighing its future use of LVR restrictions, after loosening speed limits from January. 

In a recent speech, deputy governor Geoff Bascand said the RBNZ could even make LVR a permanent fixture.

Bascand said making LVR permanent was "an important policy question for future research", and could "continue to guard against the very risky forms of lending, and may better prepare the banking system to adapt to a more restrictive calibration if risks re-emerge".

Read the latest RBNZ consultation document here. The consultation closes on August 16.

Tags: Reserve Bank

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Comments from our readers

On 10 July 2019 at 11:10 am JeffQV said:
Non article as non banks funded by trading banks are already restricted and those that are funded from offshore account for less than 0.5% of lending. Can't see RBNZ action making any difference at all.
On 15 July 2019 at 11:56 am two cents said:
Seriously, you would think our major banks were not making obscene profits?

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Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.19 4.25 4.49
ANZ Special - 3.69 3.75 3.99
ASB Bank 5.20 4.25 4.19 4.39
ASB Bank Special - 3.75 3.69 3.89
BNZ - Classic - 3.69 3.75 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Lender Flt 1yr 2yr 3yr
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
Housing NZ Corp 5.19 4.29 4.29 4.49
HSBC Premier ▼5.79 ▼3.65 ▼3.69 ▼3.85
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
Lender Flt 1yr 2yr 3yr
ICBC 5.65 3.85 3.95 3.89
Kiwibank 5.80 4.30 4.40 4.74
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.55 3.65 3.99
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.69 4.79 -
Resimac 5.30 4.86 4.14 4.19
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 3.78 3.78 3.99
Sovereign 5.30 4.35 4.29 4.55
Sovereign Special - 3.85 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.79 3.84 3.99
The Co-operative Bank - Standard 5.15 4.29 4.34 4.49
TSB Bank 6.09 4.65 4.59 4.85
TSB Special 5.29 3.85 3.79 4.05
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.69 4.79 5.19
Westpac - Offset 5.34 - - -
Westpac Special - 3.69 3.75 3.99
Median 5.50 4.29 4.25 4.19

Last updated: 23 August 2019 8:51am

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