WELLINGTON, Nov. 5 (Xinhua) -- New Zealand's financial stability risks remain higher than in recent years amid fragmentation of global trade and finance, and ongoing uncertainties, a Reserve Bank report said on Wednesday.
"As a small open economy, New Zealand would be exposed to any impacts on global economic activity or volatility in financial markets," said a statement of the Reserve Bank of New Zealand after releasing its biannual Financial Stability Report.
"Elevated global equity valuations, in areas such as tech stocks, and growing government debt levels in many advanced economies are also vulnerabilities," it said.
"Underperformance in parts of the New Zealand economy, such as retail and hospitality, is creating challenging conditions for households and businesses," said Reserve Bank Governor Christian Hawkesby.
Loan defaults have picked up, but remain well below crisis levels, Hawkesby said, adding lower interest rates and high commodity prices are supporting some sectors, including agriculture.
Banks remain well placed to manage the current uncertainty, supported by strong lending standards, including loan-to-value limits, and capital buffers that would allow banks to cope with a significant worsening of the economy, while continuing to provide credit to support any recovery, the statement said.
To promote a resilient financial system that balances stability and depositor protection with competition and efficiency, the central bank is assessing feedback on proposed capital settings and plans to announce decisions in December.
Hawkesby also noted that although most financial institutions meet cyber resilience guidelines, further improvements are needed. ■
