- Hon Nicola Willis
Finance Minister Nicola Willis today welcomed the opening of consultation on the Reserve Bank's review of capital settings for banks and other deposit takers.
"Since 2019 concerns have been raised that the Reserve Bank's capital settings may be undermining competition and efficiency in our banking industry, increasing the cost of lending to New Zealanders, imposing excessive restriction on lending to important sectors such as agriculture and community housing, and creating headwinds for economic growth.
"Last year I issued a new Financial Policy Remit to the Reserve Bank outlining the Government's expectation that in promoting financial stability, the Reserve Bank should ensure prudential regulation does not impede competition.
"My letter of expectations asked the Bank to consider a number of matters that could enhance competition, including a review of standardised risk weights, minimum capital thresholds for new entrants and access to the Exchange Settlement Account System.
"I welcome the Bank's decision, following an independent review, to consult on a number of proposed changes to its capital settings. In particular, I note proposals to better align granular capital requirements with actual risk, which the Bank says could result in better lending terms for some residential mortgages, small to medium-sized businesses, agricultural lending and lending to community housing providers and housing co-operatives. These measures would also help even the playing field between larger banks and their smaller competitors."
"The Bank has also proposed options for changes to overall capital ratio requirements, which it says would have the effect of lowering lending rates to New Zealanders. I commend the Bank's willingness to seek transparent feedback on these options.
"Crucially, the Bank notes that both options would reduce requirements for smaller deposit takers more than for larger deposit takers: meaning a more competitive environment for smaller players to compete with the big Aussie banks.
"I also welcome the Bank's decision, as part of the deposit takers core standards, to reduce the minimum capital requirement for deposit takers from $30 million to $5 million, which will reduce the hurdle faced by new entrants wanting to compete in the New Zealand banking market."
