ANZ might lend $2b less as a result of RBNZ sanction but that's 'no big deal', says banking expert
Tuesday, 21 May 2019
ANZ bank might lend about $2 billion less than it would otherwise, as a result of controls imposed by the Reserve Bank in the wake of its censure of ANZ on Friday, Massey University banking expert David Tripe estimates.
Tripe described that as a 'marginal' effect that was not as significant as the changes that could flow from the Reserve Bank's controversial wider review of the capital regime that applies to banks in New Zealand.
ANZ spokeswoman Siobhan Enright appeared to suggest there might be no tangible impact on customers from the sanction imposed by the Reserve Bank.
The Reserve Bank stripped ANZ of its right to calculate how much capital it is required to hold to mitigate operational risks, after detecting what it described as 'a persistent failure' in the bank's controls and 'attestation process'.
The change increased the minimum capital ANZ must hold to counter operational risks by about 60 per cent, to $760 million, the Reserve Bank said.
**READ MORE
* Reserve Bank plan 'has significant negative consequences'
* Reserve Bank capital plans could put handbrake on the economy
* Banks asked to take on bigger share of market risk**
Tripe said that was not a 'big deal' and believed the impact on the bank's ability to lend to consumers would be marginal.
ANZ had loans and advances totalling $126b last year.
'What it will do is it will discourage them a bit from some lending but it is unlikely to have a major impact.'
The lending mostly likely to be curtailed was riskier loans to businesses, Tripe believed.
An extra requirement for $300m to $400m of capital could result in $2b to $3b less lending, he believed.
'What it might mean is they might be slightly slower in their lending growth.'
Enright responded in a statement that the censure increased the amount of operating risk capital the bank needed to hold by about $270m.
That – in the context of the bank's total capital of $12.5b – was 'the sort of change we are used to managing in the ordinary course of business', she said.
ANZ's capital levels fluctuated each quarter but well above the RBNZ's minimum requirement of $6.8b, she said.
Tripe said the broader drive by the Reserve Bank to beef up the amount of capital banks held in New Zealand could have a much more significant impact.
The Reserve Bank announced the next step in that capital review on Monday, with deputy governor Geoff Bascand saying its proposals were 'consistent with steps taken by other banking regulators after the Global Financial Crisis'.
'There is increasing evidence that the costs of bank failures – both economic and well-being costs – are higher than previously understood,' he said.
Bascand said the Reserve Bank was in the process of appointing external experts to independently review the analysis and advice underpinning its proposals.
'An announcement is planned by the end of November, with implementation of any new rules starting from April next year.
'There will be a transition period of a number of years before banks are required to fully comply with any new rules,' he said.