Westpac calls for review of RBNZ’s capital adequacy rules
Westpac New Zealand has urged the Reserve Bank of New Zealand (RBNZ) to reassess the capital adequacy rules implemented in 2019, questioning their fit in the current economic environment.
During a session with Parliament’s Finance and Expenditure committee, Westpac chief executive Catherine McGrath (pictured left) and chairwoman Pip Greenwood (pictured right) highlighted the need for a reevaluation in light of global economic changes and the aftermath of the pandemic.
New Zealand’s financial sector is scrutinised as the committee investigates the impact of RBNZ’s capital requirements on lending rates. This review follows the sudden resignation of Adrian Orr, RBNZ Governor and advocate for the stringent capital rules initiated in mid-2022, which are scheduled to remain in effect until 2028.
RBNZ rules raise farm loan costs
According to McGrath, the tightened capital requirements imposed by RBNZ could increase the annual costs of an average farm loan by approximately $20,000, interest.co.nz reported.
The Westpac NZ CEO emphasised the challenge of balancing financial stability with consumer impact.
“In any business I’ve been involved in, you tend to stand back and do a review to ask, is the path we set six years ago still the appropriate way forward? We’ve had COVID since those decisions were made and it’s also been interesting to see what other countries have done,” McGrath said.
Global comparisons and proposals
McGrath pointed out that New Zealand’s banking regulations include layers of conservatism that surpass those of many other nations, which have begun to moderate their own regulations.
New Zealand banks are required to hold significantly higher capital compared to global standards set by the Basel agreements, which she argues places undue pressure on the banks' ability to lend.
Highlighting international movements, McGrath noted recent relaxations in capital requirements in the UK and the US, where regulators have scaled back proposals in response to feedback from major banks.
These adjustments aim to foster economic growth and maintain competitiveness without overburdening banks.
Westpac expands green financing, partners for climate resilience
In addition to regulatory concerns, McGrath expressed Westpac’s intent to broaden its financial products to better address climate change challenges, interest.co.nz reported.
This includes expanding the bank’s energy-efficiency lending program to cover broader climate mitigation efforts and partnering with insurers to offer integrated property insurance solutions.
These initiatives aim to enhance the resilience of properties against climate risks and offer more personalised insurance options for customers.
