Proposed new macro-prudential rules on property lending are a credit positive for New Zealand banks, Fitch Ratings said in a report.
The tight loan-to-value restrictions and higher capital requirements on investor mortgages proposed by the Reserve Bank of New Zealand provide greater protection for banks against major losses in case of sharp house price correction, the rating agency observed.
Further, household debt as a percentage of disposable income had increased to 160 percent by end-2014 from 152 percent seen at end-2012, which is likely to place borrowers under severe stress should interest rates rise sharply or the labor market weaken significantly.
In such a situation, banks’ asset quality could deteriorate significantly, hurting profitability and capitalization.
Fitch noted that the proposed measures of RBNZ differ substantially from the approach adopted by the Australian Prudential Regulatory Authority. The APRA has not opted for system-wide macro-prudential tools, instead seeking to manage these risks on a bank-by-bank basis.
The material has been provided by InstaForex Company – www.instaforex.com