Regulatory Alerts2022-05-17
New Zealand: Financial Sector Assessment Program Technical Note on Stress Testing the Banking Sector and Systemic Risk Analysis
The International Monetary Fund assessed the resilience of New Zealand's banking sector, which is dominated by four Australian subsidiaries and faces key risks from housing imbalances, dairy sector exposures, and wholesale funding reliance. Stress tests indicate that the system remains resilient to severe adverse shocks, with solvency and liquidity buffers sufficient to withstand significant macrofinancial downturns. The IMF recommends that the Reserve Bank of New Zealand expand its stress testing capabilities to better capture systemic risk, feedback effects, and granular credit risk parameters for commercial real estate and corporate exposures.
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