(NZ)Bank capital changes will cost economy, ASB warns | WHAT REALLY HAPPENED

(NZ)Bank capital changes will cost economy, ASB warns

The Reserve Bank's proposed tightening of capital requirements for local banks could permanently dampen the economy by more than one per cent of GDP, ASB economist Nick Tuffley has warned.

The proposal would also equate to an additional half a per cent on mortgage rates - although that would likely be offset by a lower official cash rate, he writes in a new report.

The RBNZ has proposed to increase capital requirements for locally-incorporated NZ banks, by 2023. The required Tier 1 capital ratio for the "big four" (ASB, BNZ, Westpac and ANZ) will be increased from 8.5 per cent to 16 per cent of risk-weighted assets.

In the report Tuffley acknowledges that the RBNZ is "not swimming against the global tide", with other regulator lifting requirements.

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