Further Regulatory Steps To Promote Cashflow Confidence And Stability

The RBNZ has noted that it "is further delaying the start of increases in bank capital until 2022 to allow banks continued headroom to respond to the effects of the COVID-19 pandemic and to support the economic recovery… The changes mean the increase in the Prudential Capital Buffer will not begin until July 2022. The Reserve Bank will reconfirm this timing near the end of 2021, and will consider making further amendments to the timing if the conditions warrant it. Other aspects of the capital reforms will proceed from 1 July 2021, including the new rules around capital instruments. More detail on this will be released on November 17."

• "Meanwhile, in December, the Reserve Bank will consult about re-instating loan-to-value ratio (LVR) restrictions on high-risk lending with effect from 1 March 2021."
• Westpac note that "If the RBNZ does reintroduce LVRs on March 1, it will be breaking an earlier commitment to keep the LVRs off until May 1. This raises questions about the durability of other RBNZ commitments." As a result, they suggest that "now that the RBNZ's commitment on LVRs has been broken, the possibility is raised that the commitment on the OCR could also be broken. Clearly, this increases odds of an OCR cut in February should circumstances require it."