Dr Claire Matthews: Head of Massey University's Finance school on the Reserve Bank's proposed changes to capital lending

A banking expert believes changes to capital requirements would impact home loans and other lending.

The Reserve Bank's seeking feedback on proposals to lower the requirements.

The Government is concerned the current settings are inhibiting economic growth. 

Head of Massey University's Finance school, Dr Claire Matthews, says a lot of people have said the bank's gone too far with those requirements.

"It's just taken the Government intervention to actually force them to have another look at it." 

LISTEN ABOVE

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
Afternoon, the Reserve Bank is proposing to change the rules
around how much money our banks are supposed to hold
for a rainy day. So they're reviewing the so called
capital requirement rules, which are supposed to help retail banks
whether are one in two hundred year crisis, but they're
widely considered to be onerous and very conservative. Doctor Claire
Matthews is Massi University's banking expert. High Clear, Hi, Heather,

(00:20):
how do you feel about them going softer?

Speaker 2 (00:25):
Reason to be comfortable. The reality is there's been a
lot of comment about the fact that the current regulations
were seen as a little bit higher than they need
to be. So all we're looking at is bringing them
back to what is really seen as a more reasonable level.

Speaker 1 (00:40):
And which of the two options do you prefer.

Speaker 2 (00:44):
At the stage? I don't have a strong preference. I
think we need to have a little bit more time
to have a look at them and just see exactly
what are the implications of them both.

Speaker 1 (00:53):
How would you feel abo us about us unwinding it
all together, going back to the way it was pre
twenty nineteen.

Speaker 2 (01:00):
Well, that's an option, but I think the reality is
that it's reasonable to suggest that before twenty nineteen we
were perhaps a little bit light so beefing it up
a little bit, but perhaps just not as far as
the current rules have taken us.

Speaker 1 (01:13):
I mean, there are some estimations that if we had
gone all the way through with this, we would be
paying twenty five basis points maybe thirty eight bases points
too much in contrast to the Australians. Would you say
that's about right.

Speaker 2 (01:26):
I haven't done the calculations, but I'm prepared to accept
that those calculations are probably accurate, and.

Speaker 1 (01:31):
So therefore if we stop it in its tracks, won't
be as much as that, but we could potentially save
a fair chunk in money that we're not going to
have to pay. Oh.

Speaker 2 (01:40):
Absolutely. It will have an impact on the rates that
are charged on home loans and other lending and therefore
all judiciary payments, and that's got to be good for everybody.

Speaker 1 (01:49):
Yeah, listen on that. Do you have any concern about
the fact that this review has quite clearly come about
because the Finance Minister has been asking for it.

Speaker 2 (02:00):
I mean, that is a concern, the political intervention. But
given that it's reasonable that you know, there have been
a lot of people that have said that actually the
bank Reserve Bank went too far. It's just taken the
government intervention to actually force them to have another look
at it. So yes, some disquiet, but not a huge amount.

Speaker 1 (02:22):
And then what about Christopher Luxen this morning saying that
he thought the Reserve Bank should have cut the ocr
lower earlier. Is that also a little bit of overstepping
the mark rey the independence?

Speaker 2 (02:32):
What do you think, Oh, it's fine to offer an opinion,
but the problem is when you're the prime minister, it's
more than an opinion. It's seeking to sway what's happening.
And yes, that really is going beyond what should be
being said, given that we do have an independent Reserve
Bank and they're making the judgment call.

Speaker 1 (02:50):
Okay, but the thing is clear, we all know the
Reserve Bank is wrong, right, we're looking at it. We
can all see they should have cut earlier. We all
knew the capital requirements were too onerous. So if you
have to choose between, they'm actually getting on the right
track with a little bit of political help versus independence,
which is more important to you.

Speaker 2 (03:07):
To be honest, Actually the independence is more important because
the political interference at the moment might not be too bad,
but there's a strong risk that you know, it's a
slippery slope, and you know a little bit now and
it gets a lot more significant later on. So independence
would win now over the benefits of the little bit
of political push that we've had so far.

Speaker 1 (03:28):
Claire, thanks for your time and your expertise. That's Claire Matthews,
Doctor Clare Matthews, Matthew, University banking expert. For more from
Heather Duplessy Allen Drive, listen live to news talks that'd
be from four pm weekdays, or follow the podcast on iHeartRadio.