New Zealand: Financial Sector Assessment Program: Financial System Stability Assessment
IMF Staff Country Reports, May 8, 2017
Source details
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- New Zealand: Financial Sector Assessment Program: Financial System Stability Assessment
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Bibliographic details
- Published: May 8, 2017
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781475598834.002
Summary assessment
- This paper presents an assessment of the stability of the financial system in New Zealand.
- Imbalances in the housing market, banks’ concentrated exposures to the dairy sector, and their high reliance on wholesale offshore funding are the key macro-financial vulnerabilities.
- Despite these vulnerabilities, the banking system is resilient to severe shocks.
- Strengthening the macroprudential framework is important.
Key macro-financial vulnerabilities
- Imbalances in the housing market.
- Banks’ concentrated exposures to the dairy sector.
- High reliance on wholesale offshore funding.
- A sharp decline in the real estate market, a reversal of the recent recovery in dairy prices, deterioration in global economic conditions, and tightening in financial markets would adversely impact the system.
Banking sector characteristics and exposures
- The banking sector has significant exposure to real estate and agriculture.
- The sector is relatively dependent on foreign funding.
- The banking sector is dominated by four Australian subsidiaries.
Stress testing, resilience, and scenarios
- The assessment finds the banking system is resilient to severe shocks.
- Adverse scenarios identified that would materially affect the system:
- Sharp decline in the real estate market.
- Reversal of the recent recovery in dairy prices.
- Deterioration in global economic conditions.
- Tightening in financial markets.
Policy implications and recommendations
- Strengthen the macroprudential framework to address identified vulnerabilities.
- Monitor and mitigate risks from concentrated sectoral exposures (real estate and dairy).
- Reduce reliance on wholesale offshore funding and address external funding vulnerabilities.
- Continue stress-testing and contingency planning for scenarios involving market tightening and global deterioration.
International Monetary Fund. Monetary and Capital Markets Department "New Zealand: Financial Sector Assessment Program: Financial System Stability Assessment", IMF Staff Country Reports 2017, 110 (2017), accessed 9/22/2026, https://doi.org/10.5089/9781475598834.002
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- Country Report