Wednesday 2nd August 2017
|Text too small?|
The Reserve Bank of New Zealand aims to improve the effectiveness of its prudential regulation by simplifying its regulations and by shoring up its supervisory activities, deputy governor Grant Spencer said in a speech.
"We must maintain the high international reputation of the New Zealand financial system. Within that we seek to maintain and build on the bank's non-intrusive supervisory approach and simple-yet-conservative prudential requirements," Spencer told the KangaNews Capital Markets Conference in a speech published on the central bank's web site.
The system is "highly integrated with international markets and needs to maintain a strong reputation if it is to continue its lead role in intermediating New Zealand's financial dealings with the rest of the world," he said.
Spencer said the bank is currently considering how to improve the regulatory framework after a recent International Monetary Fund Financial Sector Assessment Program and its own review of bank capital adequacy."We will continue to place emphasis on getting the right incentives in place for prudent institutional governance, supported by effective market discipline that increasingly makes use of technology advances," he said.
He said the aim is to simplify the current regulatory regime in a number of areas, but also heed the IMF’s advice about improving the effectiveness of the supervisory model. Earlier this year the International Monetary Fund carried out a comprehensive review of New Zealand's financial system against international standards, with a particular focus on the quality of financial sector regulation. The results were released in early May and included more than 100 recommendations.
Among other things, the central bank is looking to make greater use of targeted reviews by external experts in cases where serious non-compliance becomes apparent at particular institutions, said Spencer.
Regarding the current review of bank capital adequacy, "we are leaning towards simplifying both the allowable capital instruments and the methods for measuring risk, though we are in the consultative phase and far from making any decisions," he said.
The bank will also review the minimum capital ratios. New Zealand’s relatively high-risk profile, due to high industry and portfolio concentration, supports a conservative approach relative to international peers. "We are conscious that the international minimum standards are not calibrated to deal with some of the issues we face in New Zealand, including high industry and portfolio concentration," said Spencer.
On macro-prudential policies, he reiterated the bank is keen to have a debt-to-income limit tool at its disposal "even though we would not wish to use it while the Auckland and national housing market continue to moderate." He said efforts will be made to ensure the broader policy framework is understood by stakeholders, including the public.
Above all, it is important to be clear about what macro-prudential policy can actually achieve."While macro-prudential policies can help reduce housing-related risk in the banking system, they cannot control house price inflation," he said.
Spencer will take over as acting governor of the bank for six months, following the expiry of current governor Graeme Wheeler’s term on Sept. 26 this year.
No comments yet
NZ dollar headed for 1.3% weekly gain on expectations of a Fed rate cut
RBNZ knock-back gives Resolution chance to low-ball AMP - Jarden
Rail hubs may not boost Napier Port log trade
O'Connor looks to overhaul Biosecurity Act, improve animal tracing
Denton Morrell undefended at liquidation hearing
Contact steam to heat Norske Skog pellet business secured
Air NZ to amend booking engine after lawyer’s complaint
Ross McEwan to take helm at NAB
KPMG says bank capital proposals will wreck havoc on dairy farmers
Mild weather saps Vector's June-qtr volumes