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Major New Zealand banks report no direct exposure to any European sovereign debt, Reserve Bank says

Bonds
Major New Zealand banks report no direct exposure to any European sovereign debt, Reserve Bank says

By Gareth Vaughan

The Reserve Bank says New Zealand's major banks have disclosed no direct exposure to the sovereign debt of troubled European nations and their Australian parent banks have less than 2% of their assets exposed to the Eurozone.

The European sovereign debt crisis, and its real and potential impact on the New Zealand banking system through the cost and availability of debt funding, featured heavily in the Reserve Bank's latest Financial Stability Report.

However, the central bank played down New Zealand banks' direct exposure to Europe's troubled debt markets.

"The major New Zealand banks report no direct exposure to the sovereign debt of any European nation," the Reserve Bank said. "Furthermore, New Zealand banks have very little in the way of lending or asset exposures to European borrowers."

Asked by interest.co.nz whether the Reserve Bank had knowledge of, or any concerns about, the exposure of the Australian parents of the major New Zealand banks  - ANZ, ASB, BNZ and Westpac - to European sovereign debt, a spokeswoman referred to a recent speech by John Laker, the chairman of the Australian Prudential Regulation Authority.

"The Australian banking system has only a limited direct exposure to the European countries currently under the most severe financial pressure - Greece, Portugal, Ireland, Italy and Spain (the so-called PIIGS countries)," said Laker.

"Exposure to the broader euro area is larger, although still less than 2% of banking system assets. The relatively small size of these European exposures suggests that any direct impact from pressures on one of the troubled European countries would be minimal."

In August a spokeswoman from National Australia Bank, BNZ's parent, told interest.co.nz NAB no longer had exposure to about A$12.8 billion worth of Italian government bonds it had taken as collateral under a short-term funding arrangement with another un-named bank.

The Reserve Bank itself, meanwhile, disclosed in its annual report last month that it had no PIIGS debt of its own and had increased its holdings of German, Austrian and Dutch securities and slashed its holdings of French and United States securities.

In its Financial Stability Report the central bank did say, however, that if turmoil in Europe leads to large declines in commodity prices or weakness in the domestic economy, "a further round of asset quality deterioration could be expected" at New Zealand's major banks.

Meanwhile, the central bank noted that, if access to offshore debt markets becomes "even more difficult," it has the capacity to provide temporary funding to the local banking system through its liquidity facilities, which  "worked well" during 2008-09 when offshore debt markets were frozen for several months.

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14 Comments

How could our banks be over exposed, as we are net borrowers and are flogging our paper to the Europeans.

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Yeah....so what if they borrowed heaps then multiplied it by ten or more to flog cheap credit into the bubble property and farming market , which are now spitting the dummy, turning the leaverage into a razor sharp axe that is about to drop on the necks of the banks....it was all good fun right...and we all know the taxpayer will bailout the bosses...preserve the fat bloated bonuses on top of the huge salaries....what could go wrong.

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Maybe John, but BNZ's parent had nearly A$13 bln (face value at least) in Italian govt bonds not very long ago.

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The NZ banks have to cover off their securitisation stuff, and other detail, in the quarterly general disclosure statements. That is probably the best palce to look locally. The Aussie parent banks are all listed on the ASX so have listed company obligations there.

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Can you be sure that this is not like Deutsche bank saying it had dramatically reduced its exposure to Italian debt, where in realitity it kept the debt and used CDS to reduce the exposure?    And of course Deutsche was right at the front lobbying internationally for no haircuts on their stupid earlier lending.

And can they also just say their risk is reduced, by their own assessment, and be stronger better capitalised and pretty well say whatever they want to say?      Can the RBNZ be trusted to tell NZers what the banks are really doing?

Is there any evidence the RBNZ looks after ordinary NZers??    It appears to be functioning as a club for banks.  The RBNZ did nothing to prevent the NZD rising before the crisis or prevent house prices rising, it knew the banks were using other methods to get funding to keep house prices rising.  And meanwhile NZ exporters were being totally hammered and driven into the ground by the high dollar.

And while all the rival finance companies were being driven into the ground the banks appeared to be getting exceptional liquidity support of the kind that was more or less unheard of.   And now the RBNZ says that worked well?

If you ignore all the stupidity that got us into the crisis by Bernanke King Bollard Trichet and co you can argue they are making heroic efforts to prevent implosion of the bubble they created.  But why are the same people still in charge after such stupidity??

 

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I have no banking buddies.  You are as ignorant and as obnoxious as ever.

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The RBNZ is a club for private banks. You can only get an account if you are a bank. Even the government accounts are not held by the RBNZ.

Thats the meaning of 'lender of last resort', its an exclusive club you can go to if you have run out of liquidity.

 

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Now here's an interesting point...in times of war any action that endangers the economy is regarded as a treasonable act.... neck stretching stuff right!....so how come the banks can place the economy in such deep trouble...got the rope ready?

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Rope?  Check

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 "Furthermore, New Zealand banks have very little in the way of lending or asset exposures to European borrowers."...quiet correct...so they are as safe as houses!

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Why does the RBNZ need to hold Euro debt, when our debt is going overseas, can't they hold NZ debt instead, or are they just screwing with us?  Bunch of hypocrites, govt telling us to save etc, so we don't need so much offshore borrowing, yet the govts own bank, would rather have some Euro debt.  This is nuts.

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The RBNZ holds foreign currency assets for liquidity purposes if there is some sort of abnormal shock in the FX markets. These assets can be quickly liquidated to provide currency in the foreign currency. I think this is a response to the problems that happened in 1985 when the currency was floated.

http://www.rbnz.govt.nz/research/bulletin/1997_2001/1998Dec61_4ArcherHa…

The RBNZ hold about $24b in foreign assets. These assets are the main difference between the Gross and Net foreign liabilities.

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Cheers I will have a read through.

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There isn’t much time left – folks !

 Yeah - these “tomato countries” in Europe are in a real mess – making a good meal for many predators.  

http://www.youtube.com/watch?v=xjdBCeUdAmI&feature=relmfu

But how much longer can the oranges, us enjoy laughing until we are going to be peeled by the “greedy hungry” served in a dessert bowl and eaten by the criminal super rich of this world ?

With our mismanaged economy - there isn’t much time left – folks !

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