Neil Quigley: Reserve Bank Board Chair on the review of capital requirements

The Reserve Bank says it wasn't dragged kicking and screaming to a review of capital rules. 

It's put out two proposals aimed at loosening capital requirements.  

Board Chair Neil Quigley says they were reviews that the bank has been looking at for a while.  

He told Mike Hosking if they were loosened, it wouldn't cause too much of a shakeup, and it probably won't have a big effect on pricing.  

Meanwhile, Quigley says the decision about a full-time replacement for Adrian Orr is weeks away.   

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Episode Transcript

Speaker 1 (00:00):
So change a plan for the Reserve Bank will have
new rules run capital levels for retail banks. This is
how much they have to set aside just in case.
The argument from the government of the banks is, of
course it's set too high, therefore it constrains growth. Neil
Quigley is the Reserve Bank Board chairing us with us.
Neil morning, Good morning Mike. Were you brought to this
kicking and screaming?

Speaker 2 (00:19):
No. Several elements of this were reviews that we had
planned for some time and they reflect the fact that
with the passage of the twenty twenty three Deposit Takers Act,
the Bank was getting new supervision and crisis management powers.
And of course the offset for us having greater powers

(00:39):
than the regulatory frame potentially is that we need the
banks to hold less capital as a result.

Speaker 1 (00:45):
And so when we says capital how much less and
when do we know the number?

Speaker 2 (00:50):
Well, we're in a consultation process and we've offered up
two different options, one which would increase the total loss
absorbing capacity in this system and take some of the
pressure of the most expensive forms of capital for the banks.
So it'll be late in the year before we have

(01:11):
a final decision.

Speaker 1 (01:12):
Having had you guys on before, and having had retail
banks on many time, never the twain shall meet. It
is your fault that they can't do more in their
margins are so high, true or.

Speaker 2 (01:20):
Not, well, we don't expect that this review will result
in big changes in pricing. It may have some impact,
but of course our main mandate is to focus on
stability in the financial system, and we need to have

(01:41):
regard to that above all other consideration.

Speaker 1 (01:45):
Didn't the GFC and COVID tell us that banks are fine.

Speaker 2 (01:50):
The GFC and COVID told us a lot about the
ways in which problems can arise in the financial system internationally,
And the prom with each past crisis is that the
next one will never look exactly the same as the
last one.

Speaker 1 (02:05):
But in both they did fine. They did more than fine.
Their rolling in low.

Speaker 2 (02:11):
Well, they did fine in those cases for a variety
of reasons. So in this case, though, we think it
is important that we maintain a print level of capitalization,
particularly for our systemically important banking institutions.

Speaker 1 (02:27):
When you see something change, for example, in the rural sector,
the retail bank will see the rural sector of something
slightly different. Now because of your changes.

Speaker 2 (02:36):
Well, One of the implications of what we're doing is
that we're reviewing the individual loan category risk weights as well,
and that may well have an impact on some pricing
in different categories, particularly for the lower risk loans in
each category, such as rural or housing lending. You might

(02:58):
see some impact on pricing across the board. It is
unlikely to be more than about five percent.

Speaker 1 (03:05):
Okay, i'm reading, well, I've got you. I was reading
yesterday about your expansion in the Auckland real estate market.
Do you need all that space now you're laying people off.

Speaker 2 (03:14):
Well, we do need the space because we have some
problems with our building at number too, the terrace. And secondly,
our expansion in staffing is likely to be focused on
Auckland because that's where the institutions that we need to
regulate are mostly located. So we see some expansion in

(03:35):
the Auckland space. The need potentially to decant some of
our space at number two the Terrace in the future
to deal with some remediation issues for the building. So
that's why we've gone in that direction.

Speaker 1 (03:48):
Okay, how close are you to a new governor.

Speaker 2 (03:52):
Well, we're well down the track with the process and
so I doubt that you'll be kept waiting for too long.

Speaker 1 (03:58):
One days, weeks, where are we now?

Speaker 2 (04:03):
Weeks? Shit?

Speaker 1 (04:04):
All right, nice to talk to you, slightly awkwardly from mom,
didn't it now? Neil Quigley, the Chairman of the Reserve Bank.

Speaker 2 (04:11):
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