By Gareth Vaughan
New Zealand banks' returns on equity (RoE) are higher than those of banks in many other developed countries, but will probably remain "permanently lower" than pre-global financial crisis (GFC) levels due to regulatory requirements for banks to now hold more capital, the Reserve Bank says.
In this week's Financial Stability Report the Reserve Bank points out RoE at the banks is still below where it was before the GFC.
"This partly reflects market demand for higher levels of loss absorbing capacity after the crisis, and regulatory efforts to improve the resilience of the banking system."
"In the New Zealand context, low loan loss provisioning and low operating costs have meant that RoE is higher than for banks in many other advanced economies," the Reserve Bank says.
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