DTIs need deeper analysis
The group says given the coalition Government’s emphasis on improving the quality and efficiency of regulation, it seems logical and desirable the Reserve Bank’s proposals are subject to thorough analysis.
It doesn’t believe there is a strong case for introducing DTIs as banks already have significant commercial incentives to stress test loans and ensure that defaults on loans are minimised.
“DTIs also disregard the many factors which a bank will consider when assessing the capacity of a borrower’s creditworthiness,” the lobby group says in its submission to the Reserve Bank on activating DTIs and loosening LVRs.
Stress tests of banks conducted by the RBNZ have repeatedly shown they are resilient to even severe house price shocks and sharp increases in the rate of unemployment.
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