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Summary of the dairy portfolio stress testing exercise

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In late 2015, the five largest dairy lenders participated in a stress test featuring sustained low milk prices and sharp falls in dairy land values. This article summarises key insights from the test. Banks report expansion in dairy lending, at least in the near term, as they support existing borrowers facing negative cash flow. Consistent with earlier work, the scenarios generate significant increases in loss rates that are manageable for the banking system as a whole. There is a risk that the time taken to resolve stressed dairy exposures could be longer than reported in the tests, creating an ongoing source of uncertainty for banks.

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  • Ashley Dunstan, 2016. "Summary of the dairy portfolio stress testing exercise," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 79, pages 1-10, March.
    • Handle: RePEc:nzb:nzbbul:mar2016:05
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    File URL: http://rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Bulletins/2016/2016mar79-5.pdf
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    Cited by:

    1. Ashley Dunstan, 2018. "The Reserve Bank’s philosophy and approach to stress testing," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 81, pages 1-13, July.
    2. Amber Watson, 2016. "Disruption or distraction? How digitisation is changing New Zealand banks and core banking systems," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 79, pages 1-21, May.

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