ANZ NZ reviews banking rules for stability, competition
ANZ Bank New Zealand has called for a reassessment of the risk weights applied to bank lending, suggesting that the current standards might be overly conservative compared to global norms.
Antonia Watson, CEO of New Zealand’s largest lending institution, expressed this viewpoint during a session with a parliamentary select committee in Wellington.
“If I had a magic wand, I would ask the government and regulators just to take a step back and look at our risk weightings on an internationally comparable basis,” Watson said in a Bloomberg report.
The discussion takes place against a backdrop of significant regulatory scrutiny, particularly following the unexpected resignation of Adrian Orr as the governor of the Reserve Bank (RBNZ), who was a key proponent of the stringent capital rules initiated during his tenure.
Finance Minister Nicola Willis has also indicated that she is considering adjustments to the capital requirements that banks must maintain, suggesting potential legislative changes to modify these standards as part of efforts to enhance the productivity and growth of the New Zealand economy.
Implications of current capital and risk management practices
Watson highlighted the implications of the current regulatory framework, which includes both the capital levels and the risk weights assigned to various asset categories.
She pointed out that New Zealand’s approach not only involves higher capital requirements but also more conservative risk weighting compared to other countries.
“Our overall capital ratio is our capital divided by our risk weighted assets,” Watson said to the committee, stressing the dual layers of conservatism that affect lending and, by extension, market competition, Bloomberg reported.
Debate over prudential risk and market stability
The revision of capital rules by the RBNZ in 2019, which aimed to fortify banks against once-in-two-hundred-year economic shocks, has led to increased borrowing costs, impacting both consumers and the broader economic landscape.
Watson questioned the balance between ensuring financial stability and fostering competitive market conditions.
“We’ve chosen a one-in-200-year event,” she said. “Is that the level of financial stability we want? That’s not a question for us. It’s a question for you and our regulators.”
