We just got the results of the Reserve Bank New Zealand Stress Tests, and this year the RBNZ undertook both its regular solvency stress test, challenging the resilience of banks’ capital to a severe downturn, and also put the spotlight on banks’ liquidity and funding resilience through a liquidity stress test ahead of next year’s review of the RBNZ’s liquidity policy. The solvency stress test included the five largest banks – ANZ NZ, ASB, BNZ Westpac and Kiwibank – and the liquidity stress test featured those five plus Co-operative Bank, Rabobank NZ, Heartland, SBS and TSB.
https://www.rbnz.govt.nz/news/2021/12/stress-tests-show-strengthening-bank-resilience
Large banks fared worse than the smaller banks. However, banks were able to identify actions that, if effective, would considerably improve the outcome.
Now the banks is at pains to highlight the stress test scenarios are hypothetical and don’t represent its view of the most likely future path for financial stability risks. And the RBNZ doesn’t release individual banks’ stress test results. Unlike the results from the Federal Reserve in the US, where individual banks results are disclosed. In this respect New Zealand is following the opaque strategy APRA also executes, which is a pity. Not least because in New Zealand, Bank Deposit Bail-In is a thing via the Open Banking Resolution, and the RBNZ has warned people to do due diligence on the individual banks – so why don’t they disclose the detail we ask?
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