NZ Financial System Sound, Functioning Well - RBNZ
21 August 2008
The New Zealand financial system is fundamentally sound and continues to function well, despite recent headlines of financial stresses, Reserve Bank Head of Prudential Supervision Toby Fiennes said today.
Speaking to an Auckland business audience, Mr Fiennes said investors have been hurt and others unsettled by recent failures of local financial firms, frozen mortgage trust funds, and potential bad debt provisions by international banks.
"I can assure you we are well aware of the cost for people who have been unfortunately caught up in the fallout," he said. "But it is important to keep a sense of perspective.
"The majority of institutions, accounting for over 90 percent of household financial assets, are not directly affected by these current events. These institutions are well capitalised businesses and give no apparent reason for concern."
Mr Fiennes said many of the failures arose from a downturn in the property development sector. The main casualities have been the property lending finance companies, where investors have been exposed to significant risks in exchange for a relatively small margin over bank deposit rates. …