Banks well-positioned for resilience
The Reserve Bank’s November 2024 Financial Stability Report highlighted the resilience of the country’s financial system, despite ongoing economic pressures.
Deputy Governor Christian Hawkesby (pictured above) reassured that risks remain contained, ensuring a foundation of trust and confidence essential for the economy’s well-being.
Debt pressures ease as rates decline
Interest rates in New Zealand and globally have started to decrease as inflation moderates, providing relief for borrowers.
Debt servicing costs are now nearing their peak, and mortgage rates have been dropping over the past six months.
For households, this means more manageable mortgage costs ahead as the trend toward lower rates continues.
Challenges remain for households and businesses
Despite these positive shifts, many New Zealand households and businesses are still under financial strain, with rising unemployment affecting some borrowers’ ability to keep up with loan payments.
Banks are preparing for a potential uptick in non-performing loans, though these are expected to stay below past recession levels.
“New Zealand banks are well positioned to continue supporting households and businesses, including effectively handling any potential loan defaults,” Hawkesby said.
“The strength of our financial system means we are able to weather economic uncertainties and challenges, including increased geopolitical tensions.”
Encouraging competition in banking
RBNZ, which recently unveiled its 2024 annual report, is backing measures to boost competition in New Zealand’s banking sector. This includes support for the Commerce Commission’s market study and the Select Committee’s inquiry.
The Financial Stability Report outlines the steps the central bank is taking to foster competition as part of its regulatory role.
Deposit Takers Act and Compensation Scheme progress
Significant progress has been made in implementing the Deposit Takers Act, with standards for deposit takers under development.
The Depositor Compensation Scheme, designed to protect depositors, is on track to launch by mid-2025, aiming to enhance confidence and stability in New Zealand’s financial system.
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