Free Trial

MNI BRIEF: NZ Banks Well Placed For Stagflation Risk - RBNZ

MNI (PERTH)
MNI (Perth)

The Reserve Bank of New Zealand said the nation's banks would remain above their minimum regulatory capital buffers in a stagflation environment, according to results of the 2022 Bank Solvency Stress Test released on Monday.

The stress test, built on a global slowdown as rates rise amid inflation, showed the banks' Common Equity Tier 1 ratio would fall 3.3 percentage points to a minimum 8.9%, well above the 4.5% regulatory requirement. The scenario, which starts on April 1 2022, sees GDP contract 5%, unemployment rise to 9.3% and house prices decline 42%.

The scenario causes aggregate impairment expenses of NZD20.8 billion over four years compared to the NZD1.7 billion real impairment cost of Covid-19. It was the first stress test since 2014 that involved higher interest rates.

Robert covers RBA and RBNZ policy and the economy for MNI in Australia.
Robert covers RBA and RBNZ policy and the economy for MNI in Australia.

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.