Business and FinanceBusiness and Finance
Tue, March 11, 2025

Calculated risk: Will the next Reserve Bank governor relax capital requirements for banks?


Published on 2025-03-11 06:40:57 - rnz
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  • In the end, there is no guarantee a new Reserve Bank governor will reduce the capital requirements. And, under the current rules, the governor is the one who gets to make that call. While the government has some say in the appointment process, the Reserve Bank board is responsible for recommending the next appointee.

The article from RNZ discusses the potential changes in banking regulations in New Zealand, focusing on whether the next Reserve Bank Governor will adjust the capital requirements for banks. Currently, banks are required to hold a certain amount of capital to cover potential losses, a rule set to ensure financial stability. However, there's debate over whether these requirements are too stringent, potentially stifling economic growth by limiting banks' ability to lend. The article mentions that Adrian Orr, the current Governor, has been criticized for these high capital requirements, which were set to increase from 2022 but were delayed due to economic pressures from events like the Covid-19 pandemic. There's speculation that a new governor might take a more lenient approach, possibly relaxing these rules to encourage lending and economic activity, especially in light of recent economic challenges. However, this comes with the risk of reducing the financial system's resilience against future economic shocks. The article also touches on the political and economic implications of such a decision, with opinions split between those advocating for economic stimulus through relaxed regulations and those prioritizing financial stability.

Read the Full RNZ Article at:
[ https://www.rnz.co.nz/news/national/544483/calculated-risk-will-the-next-reserve-bank-governor-relax-capital-requirements-for-banks ]