RBNZ unveils new initiatives to foster banking competition
Reserve Bank officials discussed the bank’s aim to foster competition within the banking sector during a recent appearance before the Finance and Expenditure Committee (FEC).
Chaired by Neil Quigley (pictured left) and featuring key figures such as acting governor Christian Hawkesby (pictured right) and director of prudential policy Jess Rowe, the discussion highlighted the bank’s various initiatives aimed at boosting sector competition.
RBNZ’s strategic efforts
In line with its statutory goal of promoting national prosperity and wellbeing, RBNZ has integrated the enhancement of competition into its primary functions. These include maintaining price and financial stability and managing the nation’s monetary policy and payment systems.
“We have never had more focus on competition across our functions, including addressing the recommendations of the Commerce Commission’s market study,” Hawkesby said.
Measures to boost competition
Key projects that are likely to augment competition involve the development of tailored prudential standards, the introduction of a depositor compensation scheme, and the expansion of access to the payments system.
Additionally, the bank is exploring the implementation of a digital currency and collaborating on broader system-wide issues that could redefine New Zealand’s payments landscape.
“Advancing competition and innovation in the financial sector is a team effort across government agencies, regulators, and the industry itself,” Hawkesby said.
Addressing capital requirements concerns
With recent feedback on the new Deposit Takers Act and statements to the FEC, there have been critiques about the bank’s conservative capital regime potentially stifling competition.
Westpac New Zealand, in particular, has urged the RBNZ to reassess the capital adequacy rules established in 2019, arguing that recent global economic shifts and the pandemic’s impacts render them potentially outdated.wes
Quigley responded, stating, “We think that some of those claims are incorrect, but most of the claims can be tested empirically, and we consider that it is important that we respond by undertaking this assessment.”
Consequently, the RBNZ board has sanctioned a meticulous, evidence-based review of its capital settings, comparing them internationally and reassessing risk appetites specific to New Zealand.
Capital review details
This comprehensive review will expand ongoing evaluations of risk weights across various lending categories and will include a broader analysis of foundational aspects of the capital regime.
Topics of particular interest will be the degree of proportionality in the framework and the balance between different types of capital requirements.
These efforts are part of the RBNZ’s broader objective to refine its approach in anticipation of the capital requirements increase planned for July 1.
