New Zealand banks at little risk from interest rate rises, central bank says
May 1 (Reuters) - The Reserve Bank of New Zealand (RBNZ) on Monday said banks in the country have relatively little risk from surging interest rates as they are required to hold sufficient capital to cover potential losses.
The comments come nearly two months after the collapse of U.S.-based lender Silicon Valley Bank due to heavy outflows and failure to manage the impact of rising interest rates.
RBNZ has hiked its official cash rate by 500 basis points since October 2021, its most aggressive tightening streak since the rate was introduced in 1999.
Banks in New Zealand "manage this risk by matching the repricing profile of their assets and liabilities, and by using financial products to hedge any differences," the RBNZ said in an excerpt from its May 2023 Financial Stability Report.
"They are also required to hold sufficient capital to cover potential losses arising from any remaining interest rate risk, which incentivises banks to carefully manage the risk," the central bank added.
RBNZ will release its full financial stability report for the month on Wednesday. (Reporting by Sameer Manekar in Bengaluru; Editing by Lisa Shumaker)
