Banks Told To Keep Lending To Business
June 5th, 2009
The Reserve Bank is calling on trading banks to keep lending to “creditworthy” borrowers. As signs of improving confidence appear, the Reserve Bank warns credit growth has slowed in recent months. RBNZ Deputy Governor, Grant Spencer, says NZ has been fortunate its banking system has not experienced the “distress” seen in some countries. But while the overall asset quality of banks is strong, impaired assets have increased sharply since late last year.
Spencer says while substantial government interventions around the world had eased stresses in the international credit markets, the adverse second-round effects of the financial crisis on global economic activity and commodity prices will take some time to play out. He has also warned again about the vulnerability of NZ banks to external financial shocks as a result of their dependence on offshore borrowing. Spencer says banks need to lengthen the “maturity structure” – basically the amount of time the money is borrowed for – to reduce their vulnerability to offshore market disruptions.
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