Central banks all over the world are currently looking for a way to make their country’s financial system more efficient and in that regard, New Zealand is no different. In a new development, the Reserve Bank of New Zealand has indicated that the country’s financial system is good enough to tackle the current financial risks being posed by an uncertain economic climate. However, the central bank is set to do more in order to make the country’s financial system more resilient to global risks. During the course of 2019, central banks in most nations have moved to ease monetary policy in the face of economic risks.
However, the Reserve Bank of New Zealand’s annual report for 2018-19 seemed to primarily focus on structural issues with regards to the financial system. While the current state of the financial system has been declared as well equipped, the report stated that certain vulnerabilities still remain. The report indicated that the debt levels in the country are high and much of debt is restricted to two sectors. The report noted, “Vulnerabilities remain. Debt levels are high, with lending and debt concentrated in housing and agriculture.”
However, the current situation with the global economy has forced many central bankers to look at ways in which they can shore up the domestic financial system. Hence the report stated that while the economy is still robust, reforms need to be undertaken. The Reserve Bank of New Zealand said,
We need to improve the resilience of New Zealand’s financial system while conditions remain favorable, and we have been consulting on proposals to raise bank capital requirements.
