The RBNZ's controversial proposals, designed to make the banking system more stable, will force the big four lenders to boost capital ratios by 12%-16% over the next five years. But ANZ, in its latest assessment of the market, says the rules could have an adverse impact on economic growth and lending in New Zealand.
ANZ economists, led by Sharon Zollner, cite the proposals as a key "risk to growth" in their latest report. "Should the RBNZ proceed with its proposal to increase bank’s capital requirements by such a large amount, difficulty obtaining credit (particularly for the relatively risky agricultural and business sectors) could become a significant headwind."
ANZ's warning comes as major banking institutions predict a negative outcome for Kiwi borrowers. The capital rules are expected to force banks to raise interest rates to maintain profit margins. UBS believes investment banks face a $21 billion shortfall and predicts Kiwis will be forced to pay $2 billion extra on top of their mortgages each year.
The bank also reflected on last week's CPI inflation numbers, which showed a 0.1% q/q increase, lower than the RBNZ expected. ANZ says the economy is "shedding momentum", and believes "extra monetary stimulus shouldn’t be far away".
ANZ has downgraded its near-term outlook for the economy, but believes OCR cuts in August, November, and February next year will "support a gradual recovery".