New Zealand Dollar drops broadly today after RBNZ proposed to raise capital requirement for top banks of the country. Capital ratios would be increased to 16% of frisk-weighted assets. Combined the top four banks might need to raise NZD 20B over the next five years to meet the rule.
RBNZ Deputy Governor Geoff Bascand said the move would only lead to a “marginal tightening of monetary conditions”. But he added that the central could consider to loosen up monetary further is needed. Bascand said “when we set the OCR (Official Cash Rate), we set it with for a 18 month to 2 year look ahead. So let’s say we are making a decision in the third quarter of this year…we just have to feed that into our regular monetary policy decision making”. And, “if we were worried, and thinking we were undershooting inflation, undershooting maximum sustainable employment, then we would obviously look for an OCR change…that is the implication.”
