Academic journal article The Reserve Bank of New Zealand Bulletin

RBNZ's First Financial Stability Report: 20 October 2004

Academic journal article The Reserve Bank of New Zealand Bulletin

RBNZ's First Financial Stability Report: 20 October 2004

Article excerpt

The Reserve Bank today issued the first of a regular series of Financial Stability Reports which will assess the current state of New Zealand's financial system.

Topics covered in the report include:

* a review of the current economic and financial environment;

* an assessment of New Zealand's financial institutions;

* recent developments in banking regulation and supervision;

* recent stress testing of the banking system; and

* an overview of the foreign exchange and government bond markets.

Reserve Bank Governor Alan Bollard commented "The Reserve Bank sees the New Zealand financial system as being stable and functioning effectively, and the banking system as being financially robust and resilient. However, there are always risks. Experience shows that financial instability often has its origins in periods of long economic expansion, such as New Zealand is enjoying at the moment.

"Among the issues currently receiving attention is the possible implications of increased debt that has been taken on by households, and the relatively rapid growth in lending by some non-bank institutions. A significant slowing of the economy, and of the property market in particular, or higher than expected interest rates, could result in some strains for heavily indebted households. …

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