Reserve Bank moves to restrict lending
Wed, 27 Feb 2013 2:08p.m.
By Imogen Crispe
The Reserve Bank is looking at a number of ways to minimise the effects of future credit crises on the economy.
Finance Minister Bill English said this afternoon that a stable financial system is needed to give businesses confidence to grow, which will improve our economy.
He says the economy needs to be protected from periods of excessive growth, such as the 2008 Global Financial Crisis.
"In recent years we have seen the damage these periods of credit growth have caused through excessive household borrowing," Dr English told the Finance 2013 Chamber of Commerce luncheon.
The Reserve Bank is looking at proposals which would allow it to have more influence on the amount of money lending going on in New Zealand.
It could require banks and other lenders to hold additional capital against loans in specifically risky sectors, and as a buffer during an economy-wide credit boom.
Lenders may also have to restrict high loan-to-value ratio lending in the housing sector and adjust their funding ratios to minimize losses in funding shortages.
"It is intended to help manage excesses in credit cycles, as occurred in the lead up to the Global Financial Crisis," Dr English says.
He says these proposed tools will make banks realise they can't always rely on governments to bail them out.
"Banks and other lenders will then take more care if they face all the consequences of their decisions," he says.
The Reserve Bank is also introducing a mechanism to reduce the chances of a taxpayer bailout, called the Open Bank Resolution which spreads a bank's losses across shareholders and creditors.
The Reserve Bank will invite public submissions on the proposals from next month.
Once the tools are finalised, Dr English expects the tools to be used to dampen the Auckland housing market.
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5/03/2013 7:47:06 a.m.
Well it gets closer to being official policy for this double dealing govt. They want to regress back to feudal times, when their was a clear cut class of landlords and everyone else was a tenant. Almost every time National have an opportunity to do something right by the kiwi middle/working class, they opt for the Hammer approach. This is another inane, sneaky move to make it even more difficult for first time house buyers to get into a mortgage..? The 'Sale of Auckland' gains momentum and it ain't getting sold to locals with their eye on the great kiwi dream... more like they're headed for the nightmare of long term renting....English wasn't even convincing himself with this crap. Nice one Joe Key, your 'Affordable Housing' is another farce to throw on the heap with Novopay,the exorbitant NZD and the 177K created jobs fantasy...lashings of gravy and pork pies is all ya get from this govt.... its pathetic...
3/03/2013 2:54:12 p.m.
No problem. Make a law that says a certain % of home loans must be to first home buyers
28/02/2013 8:37:28 a.m.
To all who are saying that it is good that banks tighten up their lending, I ask the question. How is someone just starting out in life, save a deposit of let’s say $30 000 while paying exorbitant rent to an investor? Banks in this country do not take risks! If you want to lend $10, they ask for $20 security. You same people had a lot to say recently when the banks profits where revealed. A bank should be taking calculated risks and that does not happen in New Zealand. Now before you all attack me again, I must mention that I currently own six properties and am always looking to purchase more, but I do feel for most my tenants as they are really wonderful, hard working people who deserve a break in life. Our government was willing to secure rich peoples investments with shady investments companies offering huge returns, why then do they not secure a 5% deposit for first time home owners who want to make a contribution to this country?
28/02/2013 6:28:06 a.m.
Nationals answer to the housing shortage LMFAO. Make it more unaffordable. Guess whos making it more affordable for his mates to buy more rentals by taking first homeowners outta the auck buyers market. Someone musta complained there were too many underclassed looking at a potential investment house when they went to look. Oh well, when rents become to expensive to live in theres always a shift outa aucks and the dole to look forward too. Seems its okay now the farmers need it. Whos Brighter future?
28/02/2013 1:29:50 a.m.
If you want to give businesses confidence Mr tinkering English, introduce a Capital Gains Tax and encourage investor to invest in businesses rather than the overvalued NZ housing market. Your proposal will make it harder for first home buyers to buy a home.
27/02/2013 10:14:46 p.m.
A stupid decision in favour of the wealthy to get loans and damn the less wealthy. How on earth does this crazy government get so much of traction in the polls?
27/02/2013 10:09:30 p.m.
It won't. 1st time buyers will have to buy dungers, like their parents did, to get on the ladder honestly.
27/02/2013 8:05:15 p.m.
FFS Sanbe, so banks giving out loans to 'knife edge' loaners is good? knife edge loaners are on the cusp of anything that befalls them...no mortgage payments!...can I ask you a question Sanbe, with Labour/Greens housing policy, if a family buy into a home, and they lose job or illness what do you think Labour/Greens will do?...turf them out or let them stay there and pay $10 a week as it would be bad press paying the Govt back for the 'loan' and them turfing you out as you can't pay....see the catch 22 here in the policy?
27/02/2013 5:24:26 p.m.
Sanbe if you can not save a 10% deposit then you can not afford to buy a house. No One should have 100% mortgage, this just means that if values go down and you need to sell you are stuffed. Also if you can not manage to save then how are you going to afford all the extra rates increase and expenses the come along. Being stretched to the extreme is what causes a crises and people then lose their homes and everything they have worked for. You are better off continuing to rent.
27/02/2013 3:27:07 p.m.
The only effect this will have is to make it more difficult for first time home owners to own their own homes. Investors get away with cash deposits because they use other property as equity. We need to be encouraging first time home owners to get into the market and stop investors using other properties as equity. Make the criteria for a first time home owner easier , like a 100% loan and let the investor have to come up with the cash and not use other property as equity. What young couple can save up a 10% deposit today? This proposal will not slow down the raising house prices as investors will continue purchasing property and rent out to those who cannot save up the deposit. Then when they have equity in a property, they can purchase the next one and get some poor person to pay that off for them. Get it right for once Mr English!
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