IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2013-007.html
   My bibliography  Save this paper

New Zealand Banks’ Vulnerabilities and Capital Adequacy

Author

Listed:
  • Mr. B. Jang
  • Mr. Masahiko Kataoka

Abstract

The paper finds that, given New Zealand’s conservative approach in implementing the Basel II framework, New Zealand banks’ headline capital ratios underestimate their capital strength. A comparison with Canadian, UK and Australian banks highlights the impact of New Zealand’s more conservative approach. Stress tests in the paper show that four large New Zealand banks could withstand sizable stand-alone shocks to their exposure to either residential mortgages (calibrated on the Irish crisis experience) or corporate lending. However, combined shocks to both residential mortgages and corporate lending would put more pressure on the banks’ capital. Given high bank concentration and large offshore wholesale funding needs, the merits of higher minimum capital requirements for systemically important domestic banks could be considered, together with other measures to be implemented.

Suggested Citation

  • Mr. B. Jang & Mr. Masahiko Kataoka, 2013. "New Zealand Banks’ Vulnerabilities and Capital Adequacy," IMF Working Papers 2013/007, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2013/007
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=40229
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. International Monetary Fund, 2012. "Australia: Financial System Stability Assessment," IMF Staff Country Reports 2012/308, International Monetary Fund.
    2. Rodrigo Cubero & Mr. R. Brooks, 2009. "New Zealand Bank Vulnerabilities in International Perspective," IMF Working Papers 2009/224, International Monetary Fund.
    3. Kevin Hoskin & Stuart Irvine, 2009. "Quality of bank capital in New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 72, pages 5-16, September.
    4. International Monetary Fund, 2010. "Canada: Selected Issues Paper," IMF Staff Country Reports 2010/378, International Monetary Fund.
    5. Niamh Sheridan & Mr. B. Jang, 2012. "Bank Capital Adequacy in Australia," IMF Working Papers 2012/025, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. J. Alejandro Fernández Fernández, 2019. "The Banking System in Australia and New Zealand: A Vision together," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 9(2), pages 1-1.
    2. Yanotti, Maria Belen, 2013. "A review of the Australian mortgage market," Working Papers 2014-01, University of Tasmania, Tasmanian School of Business and Economics, revised 01 Aug 2013.
    3. Muijsson, Cherry & Satchell, Stephen, 2020. "The role of bank funding in systematic risk transmission," Finance Research Letters, Elsevier, vol. 33(C).
    4. Andrew Godwin & Timothy Howse & Ian Ramsay, 2017. "A jurisdictional comparison of the twin peaks model of financial regulation," Journal of Banking Regulation, Palgrave Macmillan, vol. 18(2), pages 103-131, April.
    5. David Hargreaves & Gina Williamson, 2011. "Stress testing New Zealand banks’ dairy portfolios," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 74, pages 15-25, June.
    6. Lou, Weifang & Yin, Xiangkang, 2014. "The impact of the global financial crisis on mortgage pricing and credit supply," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 336-363.
    7. Niamh Sheridan & Mr. B. Jang, 2012. "Bank Capital Adequacy in Australia," IMF Working Papers 2012/025, International Monetary Fund.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2013/007. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.