New Zealand Banks Need Bigger Capital Buffers, Central Bank Says
- Central bank releases results of stress test on lenders
- Decision on further delay of capital increase due by Nov. 25
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New Zealand’s central bank said a stress test it ran on lenders to assess their resilience to economic shocks supports its decision to require bigger capital buffers.
While all banks would survive a downturn that might occur once every 50 to 75 years, their capital levels would fall below minimum requirements when faced with a 1-in-200 year event, the Reserve Bank said Thursday in Wellington. The test “illustrates the benefit and necessity of shoring up bank capital in the good times to provide resilience,” the RBNZ said. “The Covid-19 pandemic has demonstrated that large shocks can occur with very little warning.”