New Zealand central bank delays bank capital hike to 2022, to review LVR

The Reserve Bank of New Zealand (RBNZ) said on Wednesday it had delayed the start of increases in bank capital requirements until 2022 to help further cushion the economic blow from the COVID-19 pandemic. The increase in the prudential capital buffer will not begin until July 2022, it said in a statement.

The Reserve Bank of New Zealand (RBNZ) said on Wednesday it had delayed the start of increases in bank capital requirements until 2022 to help further cushion the economic blow from the COVID-19 pandemic.

The increase in the prudential capital buffer will not begin until July 2022, it said in a statement. RBNZ will reconfirm this timing near the end of 2021, and will consider making further amendments to the timing if the conditions warrant it, it added. The Central Bank remains committed to increasing capital requirements in the medium term to underpin financial stability, Deputy Governor Geoff Bascand said in the statement.

Other aspects of the capital reforms will proceed from July 1 next year, including the new rules around capital instruments. The RBNZ also announced that restrictions on dividend payouts put in place in April will be retained until March 31, 2021, or later if required.

The central bank said it would consult in December on whether to reinstate loan-to-value ratio (LVR) restrictions on high-risk lending from March 2021, a measure that was removed in May to spur credit flows. RBNZ is widely expected to hold interest rates at 0.25% at its meeting on Wednesday, while introducing a new monetary policy tool to drive borrowing costs for lenders lower.