RBNZ December 2019 Bank Capital Requirements
- The RBNZ has confirmed increased capital requirements for NZ locally-incorporated banks. The RBNZ has listened to feedback and eased some aspects of the original proposal. However, we note that some of the capital increases will be frontloaded for the large banks.
- We still think the new capital regime would result in larger increases in bank funding costs (and customer borrowing interest rates) than the 20.5 basis points assumed by the RBNZ. If interest rate impacts do turn out to be higher, the net benefits assumed by the RBNZ of higher capital may not be as strong and could even turn into a net cost.
- As previously noted, the impacts will be uneven across sectors, with more significant impacts on sectors with higher capital requirements. There is also increased risk of financial disintermediation.
- The pending imposition of bank capital requirements is a key reason why we expect a prolonged period of very low OCR settings, including a 25bp cut in May 2020 and for the OCR to remain at 0.75% until 2022.
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Nick Tuffley
ASB Chief Economist
Since starting out in 1997 as an economist, it's fair to say Nick has seen a few hair-raising moments over the years, including the Asian Financial Crisis and the Global Financial Crisis.
One of Nick's strengths is his ability to communicate complex ideas in a readily understandable and entertaining way. He thrives on helping people understand the economic environment to help enrich the quality of their business or personal life. He’s proud to lead a team that has won two Forecast Accuracy Awards from Consensus Economics, and has a strong track record with their Official Cash Rate and dairy price forecasts.
Nick grew up in Christchurch and graduated with a Master of Commerce degree from the University of Canterbury. He learned his economic ropes at the Reserve Bank of New Zealand before a long stint as a Senior Economist at Westpac, and joined ASB as Chief Economist in 2007.
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Mark Smith
Senior Economist
Mark joined ASB in 2017, with over 20 years of public and private sector experience working as an economist in New Zealand and the UK.
His resume includes lengthy stints at ANZ and the Reserve Bank of New Zealand, and he has also worked at the Bank of England, HM Treasury and the New Zealand Transport Agency. Mark's areas of specialisation include interest rate strategy, macro-economic analysis and urban economics.
Born and bred in the Waikato, Mark studied at Waikato University where he graduated with a Master of Social Sciences, majoring in Economics.
Mark's key strengths are the ability to use his extensive experience, inquisitive nature, analytical ability, creativity and pragmatism to dig a little deeper and to deliver common sense solutions to tackle complex problems.
When not at work Mark likes to travel, keep fit and spend time with his friends and family.
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Yen Nguyen
Economist
Yen Nguyen joined ASB Bank in June 2024, bringing over 10 years of experience as a policy analyst in the Vietnamese government. Her expertise lies in macroeconomic and policy analysis, with a strong focus on economic strategy and regulatory frameworks.
Yen grew up in Hanoi, Vietnam and holds a Master’s Degree in International Studies from Korea University (Seoul) and a Ph.D. in Economics from the University of Auckland. Her current focus is on New Zealand’s housing market and regional development, delivering clear, practical insights to help New Zealanders understand market trends, and the economic factors influencing their communities.
Yen is passionate about applying her skills to address real-world economic challenges and supporting sustainable development.
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