NZDUSD Intra-Day Fundamentals - 28 pips price movement by Reserve Bank of New Zealand Financial Stability Report

The New Zealand financial system remains sound and continues to operate effectively, Reserve Bank Governor Graeme Wheeler said today when releasing the Bank’s November Financial Stability Report.

“The banking system is well capitalised, liquidity buffers are above required minima, and non-performing loans continue to decline. Stress tests of all the major banks' portfolios undertaken over the past six months demonstrate that banks have the capacity to manage a range of adverse shocks.

“The financial system faces the same key risks that the financial system faced at the time of the May Financial Stability Report, although the balance of these risks has shifted in the past six months.

“The first of these relates to housing market imbalances. Pressures have eased since the introduction of the loan-to-value ratio (LVR) ‘speed limit’ in October 2013 and subsequent increases in interest rates.

“We have always indicated that the LVR restrictions are a temporary measure. The reduction in house price inflation and housing credit growth are welcome developments, along with indications of increased residential building. However, there remains a risk of a resurgence in house price inflation, particularly in light of strong immigration flows. Consequently, we do not consider it appropriate to ease the LVR speed limit at this time. The Reserve Bank will continue to closely monitor the housing market,” Mr Wheeler said.