RBNZ consults on macro-prudential framework
Deputy Governor Grant Spencer said: "Following the lessons learned in the global financial crisis, policy makers internationally have been seeking ways to lessen risk in the financial system.
"Macro-prudential tools can have a role to play in this, by reducing the risks associated with excessive credit and asset price growth, or a reliance on unstable funding sources. As a result the Reserve Bank is now consulting on tools it believes could be useful additions to the policy toolkit in New Zealand.
"Four macro-prudential tools, which have the potential to be applied to the banking system, are being consulted on as part of this process.
"It is important to note that these tools would not replace the existing prudential regulation of banks already carried out by the Reserve Bank, but would be supplementary tools, used from time to time to help manage risks arising from the credit cycle."
The tools outlined in the consultation paper include:
- the countercyclical capital buffer;
- the core funding ratio;
- sectoral capital requirements; and
- restrictions on high loan-to-value residential mortgage lending.
The consultation document explains the tools in more detail, as well as setting out the proposed decision-making, governance and accountability framework for conducting macro-prudential policy in New Zealand.
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