Reserve Bank doubles down on capital proposals

RBNZ deputy governor Geoff Bascand delivered a speech today entitled "Safer banks for greater wellbeing", aimed at drumming up support for the controversial capital proposals. Bascand outlined the continued risk of another banking crisis and said lenders should hold extra capital to absorb losses and protect the wider financial system. 

He said he wanted to "level the playing field", as the country's big four banks used internal capital models with lower requirements, giving them a competitive advantage.

Under the proposals, banks would need to hold between 20% and 60% more as a safety buffer, making New Zealand one of the toughest bank regimes in the world.

Bascand said the proposals could help avert another 1980s-style banking crisis. "I fully remember the stresses of the 1980s/early 1990s, and contributing to the subsequent fiscal and social policy adjustment. Perhaps one banking crisis per lifetime is one too many?"