Reserve Bank wants to see 'modest' credit growth return to a deleveraging business sector

Are New Zealand businesses running lazy balance sheets and need to borrow more?

By Gareth Vaughan

The Reserve Bank has reminded banks and businesses that a return to "modest" levels of lending growth to a deleveraging business sector is required if an economic recovery is to be sustained.

In the latest of its bi-annual financial stability reports the Reserve Bank notes that overall annual lending growth has fallen from more than 15% in 2007, prior to the global financial crisis, to just 0.3% in the year to September 2010.

The central bank's Financial Stability Report says bank lending to business is "particularly weak" compared to previous economic cycles. The latest monthly data from the Reserve Bank shows business lending, as of September, down 7.6% year-on-year to NZ$71.46 billion. Month-on-month the September total is down NZ$265 million from August.

The dramatic drop in business credit led ANZ's chief economist Cameron Bagrie to suggest recently that businesses had deleveraged to the extent that many now had "lazy balance sheets."

The Reserve Bank suggests that banks generally remain willing to lend to credit worthy businesses and should be well placed to do so, having only suffered "modest" loan losses through the recession.

"It is important that the banks continue to lend to businesses on reasonable terms,' the Reserve Bank says.

"A return to modest rates of credit growth will be necessary to sustain economic recovery."

It notes that the cost of borrowing for businesses is higher relative to the Official Cash Rate than in the past, which is probably contributing to the "perceived tightening" of credit conditions in the business sector.

"This at least partly reflects higher funding costs for banks," the Reserve Bank says.

"The higher cost of credit, continued weakness in the domestic economy, and a reduced appetite for debt continue to drive weak demand for bank credit from businesses."

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It is not businesses that need to borrow, it is banks that need to lend.

Excess deleveraging is being forced by banks and lenders (whether directly or indirectly), not by the voluntary actions of borrowers. 

Bang on CJ....and what a load of bollicks from Bolly's overpaid mob...the right action by business is to reduce lending and increase saving....that way they will be able to fund their own growth at a time when costs are lower....

Credit growth is in reverse in the business sector and therefore if the RB is to be believed....there will be no sustained recovery!

Go you "lazy balance sheets" go... and bugger the banks. Who needs them when you have no debt and growth in your savings.....which you do not need to keep in a bank!.....

I look for companies with low gearing levels , to invest in . They can afford to pay out bigger dividends . They can bide their time for expansion or improvements . They'll ride out another recession easier . And they're ripe being taken-over , a windfall profit to me .

Bugger orf , banks !

It slowly dawns on Mr&Mrs Peasant that a bank is just an economic if we can foster this new found understanding...we have a pathway to greater wealth based on savings and not bloody debt. Imagine this...a competition to find the most "lazy balance sheet" and reward the owners with a tax cut for them....yes the govt would see tax revenue from bank profits go poof but since most banks pay stuff all tax...where's the loss....and with all the savings we could become the lenders to the world..................right...back to the BS and spin...wonder what wonders will emerge from the next banking advertising fluff.

Right on.......


Nice to see the new laws somewhere to stop tv adverts pushing junk food on soon before govts enforce laws to prohibit bank advertising pushing credit onto punters with puddings for brains?

Ummmmmm , who does that leave for the banks  to loan to , anyone ?

Would Goofy qualify for a loan.....!

Socialists don't need a loan ! Expect Goofy / Klinger / and Cunny to appropriate everything they want from the leeches in society who own the means of production .......... ...... As per their hero , Hugo Chavez !

And if you don't want to pay banks interest on a mortgage these people are certainly worth checking out

The RBNZ can call for more borrowing all it likes, but the problem is really a relentless pulling back of credit by the (Australian) banks. 

The following may illustrate:

I own a medium-sized business, turnover around $8.0m. We have been dealing with the the same (now Aussie) bank for 20+ years; never any problem with servicing our O/D.

We recently CLEARED our O/D, have no borrowings at all except small monthlies on our company Visa cards and I have signficant personal savings of over $2.0 m, also with the same bank

Despite this, we were approached by the bank several months ago, asking us to relinquish our company credit cards (total credit limit $30 k or so).

Our account manager apologised but said it was new policy driven by head office - the numbers from the business weren't good enough to justify even that small level of borrowings (we are just breaking even). They run everything these days through formulas, and if you don't stack up you won't get a penny.

We had to destroy our five company credit cards and I am now having to place all of my company-related borrowings on my personal card.

The irony is that my personal financial situation is better than it has been in years, and I hadn't even asked them for any money!

I would look for another bank, but a) this is a major hassle as our bank account info is published in all of our corporate material and b) I suspect the other major banks are the same.

Goodness knows how we would be treated if we actually needed some money!

Well done Spartan....carry on without the your profits and when next the bank comes to tell you your balance sheet is "lazy"..tell them to stuff it in their ear.....


Very interesting comment. The big four banks tell us regularly that they are open for business. Apparently not.

I welcome other anecdotes from small to medium businesses on exactly how their banks are treating them.

Also, I'd like to chase up the new 'company policy' on credit cards driven from head office with the bank in question. Feel free to or



Hi Bernard

My impression is that the banks' comment that they are "open for business" applies only to lending secured on property.

They are very negative when it comes to even the smallest unsecured debt, as we found when they took away our credit cards, despite having plenty of $$$ to secure the relatively small monthly repayments. This was quite a shock, as you can imagine.

The equations they use to run the rule over your business are blunt instruments. They don't take into account qualitative factors like: your debt history, your length of time with the bank, other personal information.

So if your small-medium business needs an O/D and your mortgage is maxed out, you will need a supportive family member who can lend you some money.

Your bank will probably NOT be "open for business".


Why do we need to borrow to return to a sustained modest growth?

This ends up with we have to borrow more and more ie accelerating debt and at some point we saturate again, then we cant borrow any more and we collapse, again. So I just hope real businesses realise its a banking/finance blood sucking scheme and just dont play the game.  So it will be a bit tough for a bit....then we will get the hang of not needing bankers taking away the profits.......I seem to talk to ppl who say that they are making 5~10% profit, yet the bank interest rate is 50% of the company profits went in payments to banks....if they get a downturn that 5~10% disappears but the bank still wants its 7%+ and may even call it in and you go bankrupt....


It's an oxymoron. Actually, in my humble opinion, it's demonstrable humbug.

You aren't growing if you're borrowing, and if the borrowing is from the future (it is) and the future can't underwrite (it can't) then it's a fraud.

Is that where we're at? 

Where's the financial media, and their in-depth appraisal?   "An economist says"

Yeah right.

Our lives are governed by dolts.

Peter Cresswell on NotPC has put up five youtube clips of a documentary that explains exactly what is wrong, and the fix for it: that is, get rid of all the tin pot Kim Jong's that run our Western economies - and write about them - and slash the size of our states in half (and just the start).

You won't regret one hour invested in watching these clips, and the only time I would advocate the inititation of force would be forcing every politician to watch these:


Britain's Trillion Pound Horror Story:

Part I

Part II

Part III

Part IV

Part V

Here is my solution to the RBNZ's wishes.

QE in the USA involves the Fed buying Treasury Bonds with "printed money", or buying securities from the banking sector with "printed money".

I think the best route into the economy for "printed money" would be via company tax owed to the Tax department. Reserve Banks should buy THAT debt with "printed money". Company Tax owed to the government would then become a source of business finance, with interest payable at the same base interest rate as the banks enjoy.

"Tough" for the banks. They long since forfeited their privelege as a conduit into the economy for QE.

Who holds the note?  The IRD, so that idea wouldn't work as it would be the IRD selling the note. 

If you are thinking of "real bills" then the bill would be redeemable back to the issuer . . . for what?  What use does the RB have for the output/products/services of a company.  The company could sell the bill, but it would still owe the IRD, and the IRD knowing that the company had been paid money for the tax bill would demand that it be paid.  The company is still left with a claim on it's output by the RB, for which it has already been "paid".

I mean the Reserve Bank buys the note off the IRD. QE sometimes involves the Reserve Bank buying tradeable securities off banks or Treasury. My idea is that they buy company tax revenue owing, with newly created money.

Businesses then owe the tax debt to the Reserve Bank, not the IRD. If the Reserve Bank wants them to pay it back, it raises the interest rate. This would be a far more effective way of "stimulating" and "cooling" the economy, because it stimulates and cools at the best point. The problem this thread is discussing, is QE that does NOT translate into lending to businesses. This is my solution.

What difference is an accounting shuffle between two departments of the same entity going to make. An accounting shuffle providing the IRD the benefit of the printed money . . . for the Government. It would be far better not to tax in the first place. If it's a means of adjusting the penalty interest rate then just do that. QE is never going to work. It's part of the scam. People think of the Government as being like a separate person. It's not, it is a sovereign person made up of it's constituents. There is no need for a Government to go into debt apart from the printed currency in circulation, and the fact that they do is part of the scam. This guy explains it very well and Mark's youtube links above just go to show how deep the scam is. Just why did Gordon Brown sell all of that gold?


QE is never going to work because it has never been about a shortage of money. Just remember money is printed out of thin air at the stroke of the borrowers pen, the bankers job thereafter is to package, slice and dice it, sell it a dozen times over to pension funds, sovereign wealth funds (mugs like Michael Cullen) municipals, so that it is never extinguished.


Wolly, go on, write the story, you've almost stepped over to the “other side”. GBH to follow.

Loved the UK video's

Remember we are heading for over 50 % of GDP in Govt  SOE's and Local Gov't.

It won't work and there's no way out under Johnny.

Spending our days arguing about the foreshore won't pay the bills !

So it's just a long slow decline to another failed pacific state - and poor to boot.

Luckily the kids can jump the ditch  for  $ 100+ bucks and join the real world

wonder if Bollard read this:

probably not, it would be like a Catholic reciting the Nicene creed.

I always remember at the beginning of our business in 1975 – no money – no financial support from the parents or others – but lots of skill, energy and enthusiasm – putting every $ aside – invested back into the business again and again – no luxury for years, no car, no boat, no holiday, no restaurants, no cinema, no cards, no house – renting, saving - just working hard like other business people did too – day in day out for years - and no bank was ever needed – it was a different time - surrounded by a different culture - yes - real old fashion mate !

Beautiful morning in Marlborough...birds singing and the smell of the bush drifting through the valley...great to make an early start...and isn't it fantastic to be 100% debt not owe a bank a bloody penny.

I have an urge to write a fable about a land of plenty where the people never borrowed money but always saved some of what they earned...where the only bank was a place where capital was kept and transfered between owners with no interest paid on savings. The only cost being a management fee on transfers. Not a 'for profit' entity!

Next door to the AA clinic would be one to help those with the 'greed and envy ' the GE clinic!

Trade banking exchange would be managed by the same entity that looked after the savings.

There would be debt cards instead of coins and paper more germ saturated virus spreading 'paper money'.

Utopia! No worries.......?

To borrow or not to borrow..!

 "With billions of dollars of cheap debt from pre-global financial crisis days still to be refinanced at more expensive levels, the banks could opt to raise loan charges above any Reserve Bank increase to bridge the financing gap."

But we're different in Noddy...these events cannot impact on us......

 "This will feed through to the bottom line of its biggest and most profitable division for the remainder of this financial year, although the group's overall earnings are being maintained by improved performances at its commercial, wealth management and New Zealand businesses."

That's you kiwi peasant with a are propping up the aussie bank and holding back any rate rises for their borrowers....don't that give you warm fuzzy feelings!

Yes Wolly - great morning here in Kaikoura too !

In people’s sheepish perception it is good to see the banks closed at least on Sunday, otherwise they would pilgrimage, thinking they are “The Houses of God” - like they do it with shopping malls.

Just been watching a Fallow hind on the neighbour's patch...500 yards away at a guess...she'll come closer when the wild plums are ripe. Wonder how many wake up to see that from their yard!

i guess a few Fallows do...

Wolly, you are starting to sound like a return of the Social Credit Party

Oh hell....where are me pills quick!

the banks have a major problem and so does the rbnz. good payers are currently paying off debt. those that are indebted up to their eyeballs are struggling and in many cases in default. Unless the banks can push more credit then there books will start to look rather horrible. Impairmed assets as a % of receivbles will continue to rise, and interest margins diminish, and profits along with it! couldn't happen to a nicer bunch.

disclosure - i am in the finance sector and we have never been so flush. we have taken on more retilaiers in the past 2-3 months than we have seen over the past 15yrs. The typical comment we get is general discontent with the bank or lack of credit on offer by them? 


Kane02. Where are you getting the bulk of your funding from to lend to these retailers?

What is your margin?