Decisions on DTIs and LVRs to be in the hands of new RBNZ committee
The RBNZ is forming a new financial policy committee that will make decisions on debt-to-income (DTIs) and loan to value ratios (LVRs) for lending.
Wednesday, October 8th 2025, 8:42AM
by Sally Lindsay
The financial policy committee (FPC) will be given authority to make key policy decisions relating to financial stability, including setting the prudential requirements for financial institutions regulated by the RBNZ.
It will also set capital and liquidity requirements for banks and other deposit takers.
There was major criticism during the banking inquiry by the four big Australian-owned banks and smaller banks about the level of capital banks should be required to hold. The RBNZ has already moved to look at this issue and is expected to decide by the end of the year.
The new committee will consist of the RBNZ board chair, the governor, three other board members, and up to two external members recognised as experts in fields relevant to the FPC’s work.
RBNZ deputy chairman Rodger Finlay says the creation of the FPC will strengthen financial policy making, with greater focus and expertise brought to bear to make sure that the New Zealand financial system remains strong and stable.
Establishing the FPC is in line with recommendations from Parliament’s Finance and Expenditure Committee’s recent Inquiry into Banking Competition to enhance the RBNZ’s financial policy making.
Finlay says the creation of the FPC came after talks with Treasury and Finance Minister Nicola Willis about ways to apply more expertise and experience to financial policy decisions.
During Parliament’s banking inquiry there was criticism about the board lacking expertise and decisions not being scrutinised enough.
“A committee with formal policy decision-making authority from the RBNZ board and credible external experts is seen to achieve this outcome,” he says.
The RBNZ will soon advertise for the two external FPC members and plans to have the committee operational from early 2026. It will mirror the Monetary Policy Committee, which sets the Official Cash Rate (OCR).
"Service on the FPC is a great opportunity to be at the heart of financial policy making,” Finlay says.
“We look forward to receiving applications from experts who can give us independent perspectives and constructively challenge policy proposals."
The FPC’s decisions will be subject to oversight by the full RBNZ board.
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