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Monetary Policy

Last updated: August 16, 2021

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Economy

Monetary Policy

John Pask

Published: August 16, 2021

Issue for Business: Impact on the availability and cost of capital to business

Action: Government currently reviewing the Reserve Bank Act with a number of consultation phases which BusinessNZ has been involved in. Latest being emphasis on financial stability rather than efficiency which is problematic. Capital Adequacy requirements which will require banks to hold more capital funding currently on hold (due to Covid-19) but likely to proceed while details surrounding the Mandatory Depositor Insurance is currently underway. Debt to Income Ratios are also likely to be introduced.

Outcome: While BusinessNZ continues to promote the importance of a sound financial system, we continue to point out the potential for unintended consequences, including the cost and availability of capital, if the Reserve Bank takes a very conservative approach to managing risk.

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