Q+A: Economists on slowing economy, Reserve Bank capital proposals

Former Reserve Bank Governor Dr Alan Bollard was asked about the Reserve Bank’s proposed new capital requirements on Q+A tonight:

“I can’t completely comment on that other than to say this is a really complex question. A lot depends on the different models that are being used by the Reserve Bank in all of this. There’s some significant suggestions put out by the Reserve Bank, they may be flying some kites in all of this, there may be arguments for increasing capital. I don’t think we had it that wrong and we did come through the financial crisis in pretty good conditions and sure, ultimately, putting up capital requirements does mean that lending becomes more expensive and you do see it happening through in the markets but I wouldn’t expect there to be a sudden impact one way or the other in all of this.”

Economist Cameron Bagrie says he sees the capital issue as an insurance policy:

“We want to make the banking sector more resilient, safer. I actually don’t have a problem with that. I’m not convinced 20 billion is the right number, maybe 10 to 15 is more appropriate – the issue then is who pays for it. And I guess the banking sector’s coming out – and I’d go so far to say they’re scaremongering – that’s actually saying that borrowers are going to wear the full cost. I think it’s going to be spread across savers - slightly lower savings rate, borrowers – slightly higher borrowing rates, and shareholders can expect to get a slightly lower return. Unfortunately I don’t think the shareholders or ANZ or some of the other banks share that view. “

Please find the transcript attached and the full interview here.

Q+A, 9:30pm Mondays on TVNZ 1 and one hour later on TVNZ 1 + 1.

Streamed live at www.tvnz.co.nz

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