RBNZ does a u-turn on bank capital requirements

The Reserve Bank has bowed to pressure from the Commerce Commission, the banks and submitters to parliament’s banking inquiry and will conduct a review of its bank capital requirements.

Lower capital requirements would likely mean lower interest rates and greater access to funding for borrowers.

“The Reserve Bank board has agreed to an evidence-based framework for a review of our capital regime utilising international experts and assessing it against the regimes in other countries,” chair Neil Quigley told parliament’s finance and expenditure committee (FEC).

Quigley said the banking system is profitable and that it isn’t capital constrained, “so lending could be increased if there was demand.”