Finance Minister Bill English and Reserve Bank Governor Graeme Wheeler have signed a memorandum of understanding on measures aimed at further protecting the economy and financial system
The memorandum, provides four new measures for the Reserve Bank to apply if necessary. It requires banks to:
- Hold additional capital on their balance sheets as a buffer during an economy-wide credit boom.
- Hold additional capital against loans in specific sectors if risks emerge in those sectors.
- Adjust their funding ratios to use more stable sources of funding to avoid short-term funding shortages.
- Apply quantitative restrictions on the share of high loan-to-value ratio loans in the housing sector.
More information here: New tools agreed to enhance financial stability
