I found this interview with him very helpful and fresh and covering lots to do with our investments and where to from here for us and the planet..
Listenduration 35′ :04″
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I found this interview with him very helpful and fresh and covering lots to do with our investments and where to from here for us and the planet..
Listenduration 35′ :04″
Orr can’t be any worse than Wheeler even though he has ‘endorsed’ Wheeler’s recent actions and outlook.
The RB is fueling an inflation problem that will require numerous hikes in the future resulting in an inevitable recession in 2019/2020
They seem blindfolded with some idealistic views at the moment. I hope Orr can see what might happen and start acting now before it’s too hard and all too late
Good luck to him ....seems a nice enough guy.
Orr seems to want to get involved in ‘populism’ - not a good thing for the Governor of the RBNZ
The carry ons in Aussie banks one bandwagon he has jumped on
A week or so ago he wanted us all to know that New Zealand Banks were different and there wasn’t anything to worry about but this week He was “demanding” answers from NZ banks (even though he has no remit to do so)
Probably didn’t want to miss out on being on the band wagon and even worse may have even been egged on by Robertson
Not a good look
I think the abrupt about face tells you he was more than egged on by the MOF ......
Any links to support your arguments guys?
April 22 no worries says Orr -
“The true problem and challenge going on in Australia is cultural,” Orr said Sunday in an interview on Television New Zealand’s Q+A. New Zealand bank culture “is infinitely better than some of the activity you’ve seen in Australia,” he said.
https://www.bloomberg.com/news/artic...than-australia
May 2nd - Robertson says NZ branches are ‘obligated’ to prove they are not crooks
https://www.nzherald.co.nz/business/...ectid=12043691
And Orr and FMA summons the bank bosses to a meeting to make sure they prove they are not crooks
Everett said his and Orr's message was; "It’s not credible to just say that New Zealand is different. You have to demonstrate why either the business structures here, or your business practices here, lead to different outcomes. Now we at the FMA, we see some of that. But actually we think the banks need to front up and really explain why it should be different. And that’s the process that we’re going through with them now.”
https://www.interest.co.nz/news/9350...ve-their-banks
And Orr doesn’t have a remit to take such action ....hmmm
Followed y
"Mr Orr said householders and investors also needed to consider whether they were putting all their financial eggs into one basket when it came to the housing market"
Quoted from the above link. This is something to think about seriously before it is too late.
Hope we are not same as Canada. Good luck for new Governor.
https://www.theglobeandmail.com/repo...ticle38280148/
Credit quality of Canadian banks under strain: Moody’s
Thanks guys. i dont really see an about face. In aus there is a Royal Commission inquiry into misconduct, here the banks are being asked to" prove they are different"
"Reserve Bank Governor Adrian Orr says there is no need for a similar Royal Commission in New Zealand. Orr said the culture of the New Zealand banks is “infinitely better than some of the activity in Australia.”
Asked if he agrees, Robertson says, “that’s certainly what we have been told."
Question still unanswered is why is Orr even getting involved and asking for them to prove they don’t have a bad culture in NZ
Orr (or RBNZ) banking supervision powers are about the maintenance of a “sound and efficient” financial system .......not about market conduct.
Dangerous if he just wants to be a ‘popular’ governor jumping on every bandwagon ...and seen to be in bed with the MoF
I see our man Adrian making comments about things that RBNZ Governors shouldn’t be involved in (Chch rebuild). Ok if in his old job but not for this job.
He’s becoming a loose cannon
Our vision and values
Our purpose, vision and values
The Reserve Bank's purpose is to promote a sound, efficient and dynamic monetary and financial system. It seeks to achieve its vision - of being the best small central bank - with values of:
Integrity: Being professional and exercising sound judgement.
Innovation: Actively improving what we do.
Inclusion: Working together for a more effective Bank.
The Bank aims to develop and implement highly effective and efficient monetary, regulatory and financial policies that are well suited for the New Zealand economy and financial system. It endeavours to ensure that: the Bank’s objectives and priorities are sound, clearly communicated and understood; its business operations are well managed; and it invests wisely in the recruitment, training, development and retention of its staff. The Bank also invests heavily in reviewing and testing its policy frameworks and policy settings in light of domestic and international experience, and ensures that its independence is balanced by appropriate public disclosure and accountability.
Spot on, Jt!
Let's not jump to any conclusions about the new governor. I find his communication "openness" to be rather refreshing - no tweets though, thank you!
A new perspective Guv - i find this quite refreshing
http://www.sharechat.co.nz/article/992e11ba/governor-orr-draws-on-t-ne-mahuta-to-tell-rbnz-s-new-story.html
He says he can lay a mean hangi!
Too many distractions diverting his attention away from the main job I think
Wasn’t bad that after promoting ‘transparency’ the RBNZ banned media and even reporting from a speech to business people recently ...aparently this is what transparency means - “...communicate directly with a group of people who will be better informed after the event than they were at the start. That fits very well with our strategy to communicate more widely.”
Also it seem strange that even though the RBNZ say 4.6% is the best guess of the unemployment rate consistent with keeping inflation low and yet the Reserve Bank has allowed it to fall to 4.4% without considering the need for at least a token OCR hike ...but then saying the next change could be up or down maybe he has considered a hike but is signalling a cut if anything is like. We’ll all suffer in late 2019/2020
Clearly not into crypto
"The death of the currency is much exaggerated at the moment, and likewise the life of a lot of these cryptocurrencies," Orr said.
Diversity and Inclusiveness thats our future.No need to be scared, embrace positive change and leave redundant RB habits behind. KEEP UP :t_up:
"I think we were lagging behind in some places," Orr says. "It's not just tikanga Māori, it's about accepting what future New Zealand looks like. It doesn't look like current New Zealand. It's going to be Polynesian, Asian, European, as opposed to European, Polynesian, Asian" and the bank has to grow with the change.
Maybe wishful thinking from the Euro-haters.
http://archive.stats.govt.nz/browse_...2013-2038.aspx
Stats NZ still has European NZ'ers as a comfortable majority of the population out to 2038 (and by inference beyond), so his characterisation is completely bogus. Possibly more worrisome for our treaty partners as they will be shortly overtaken as out largest minority.
We seem to be straying well away fom this forum's theme - Investment Strategies.
;)
Good speech by Orr ....good probably because I agree about short termism
https://rbnz.govt.nz/research-and-pu...eech2018-09-07
Orr sounds bored as a RBNZ Governor .....seems more interested in things other than monetary policy (and my opinion he’s not doing that well)
Excellent read , thanks for the link w69.
yes thanks from me too w69.
Another Orr masterpiece (under guise of RBNZ)
https://rbnz.govt.nz/-/media/Reserve...huta.pdf?la=en
Good to see NBR telling Orr just to do his job .....and I’m not Shoeshine
We don’t need no rockstar Reserve Banker
https://www.nbr.co.nz/analysis/we-do...0554d-49461157
What does an interest rate say about an economy. You lower it to increase growth and increase it to decrease growth.
https://www.rbnz.govt.nz/monetary-po...rate-decisions
Definitely pro growth with another cut expected.
8.25% in June 2008. Hard to believe in this day and age.
I was interested in NBR article cited but it is behind a paywall.
I found this article by Dr Bryce Wilkinson online
https://nzinitiative.org.nz/reports-...bank-deposits/
I'm confused when did the open bank resolution include a government guarantee. I see it mentioned in the graphic here
https://www.rbnz.govt.nz/regulation-...ank-resolution
but if you click on Q& As you get this
https://www.rbnz.govt.nz/faqs/open-b...on-policy-faqs
Not a big fan of the NZ Initiative, a think tank unable to work out why GST is regressive. Sounds more like they have an ideological bent they want to push. If the free market is the best option they should first go for the abolition of interest rate controls by the central bank and an end to monetary instability in the form of targeted inflation rates.
Although I agree taxpayers shouldn't be guaranteeing any industry and a taxpayer guarantee won't encourage bankers to act more responsibly. Although who pays for the deposit insurance most countries have? The depositors? I like the idea you won't be completely wiped out in a bank failure.
RBNZ policy like many central banks goal is forced by short term thinking Govt(that in turn do the Banks bidding) is to make sure the property market does not fall in value, in turn, pressuring the finance consumer model the banks need to survive
As unlike the US the local banks hold the risk on properties decreasing in value i.e I don't think NZ/Aus banks have shifted the risk off the balance sheet like what we have seen in the likes of the US market with CDO's to retirement funds (which then blew-up crashing the funds value)
THey clarify that with:
All funds that are not frozen will be subject to a government guarantee to ensure that all participants in the financial system are able to engage with the re-opened bank with confidence that any transactions will be honoured.
And of course they dont quantify the frozen amount, it might be bigger than you think!
Aaron - you might enjoy this
http://www.davidmcwilliams.ie/2018-articles/
Dare I say that that it sounded reasonable to me. Googling him indicates he is not a total crackpot although he is an economist(arts students shouldn't be running the world). I think it may have been him who wrote an interesting article regarding Ireland and the GFC whereby he pointed out the only reason they had a debt problem was that the Irish were buying houses from each other at higher and higher prices in a virtuous cycle of higher valuation more equity more debt available to pay more for the next house. It sounds like the makings of a good joke about Irish stupidity like the ones I used to hear as a kid, but it also sounds a lot like NZ and Australia currently, although US, European and Chinese funny money may also help as some of the Central Bank bond buying must eventual flow to our shores.
Although I go on about the greedy generation, I think their rip off of younger generations is only a small part of the problem. Extreme disparity in wealth(and power) might be the main problem and it is being exacerbated by Central Banks and QE and low interest rates ensuring high asset price inflation.
From what I read I suspect a majority of boomers main store of wealth is their house and possibly a small portfolio of shares so they continue to support a system that tries to look after this to the detriment of the young and the poor not necessarily out of greed but possibly out of fear. There might be a better way, I am unsure what it is but a start might be getting rid of targeted inflation and stopping the deceptive use of inflation to get rid of debt over time.
I have heard the term honest money being used, currently it is being used to deceive as the wealth effect is currently real but won't be if wages and the price of everything else catches up to asset prices.
I think the problem might be that QE and interest rates and wealth disparity might be getting more extreme each time QE happens or interest rates fall in the face of rising asset prices. Also the constant growth model may be running up against the environment and the limits of the planet. Who knows personally I think the younger generation shut out of the housing market can be more idealistic in their views as they have nothing to lose.
Good post Aaron
I’ve always enjoyed reading David McWilliams over the years and once was lucky to see him in action in a Kilkenomics session (where economics and comedy come together).
Maybe it’s more his style of writing than economics that attracts me but his subject matter is always interesting
Best piece was this from 2007
http://www.davidmcwilliams.ie/the-generation-game/
RB under Orr getting even weirder
https://www.nzherald.co.nz/business/...ectid=12206354
In a speech the other day a RB guy said ‘It’s like putting the roof on while the sun shines’ ...goodness gracious me
Cometh the the caring govt , cometh the Gov to match. Times are are changing for the better, we adapt too. Great stuff. Adapt or be irrelevant.
“ Let’s leave Tane Mahuta in the forest. He has no place on The Terrace“
https://www.interest.co.nz/opinion/9...cricket-umpire
Thanks for highlighting the last line, it shows the writer has got some unhealthy agenda against the governor and his idea of yet more authorities and regulatory bodies is just supporting his network of talking heads all , justifying their jobs with spin and hubris and butt covering.
Transparent indeed, adapting ,no.
Unhealthy agenda? I thought it was a well structured opinion piece from a very knowledgeable writer. Orr needs to deflate his ego before someone else does it for him. We don't need rockstar RB governors and economists. We need sound policy and a functioning regulatory regime. Going and sitting with Te Roroa to get permission to talk of Tane Mahuta is PC BS. We've already got a flaky feel good PM, we don't need it spreading further.
I see Orr (OK the RBNZ is) is recruiting for a CULTURAL CAPABILITY ADVISOR MAORI to help implement his "Te Ao Maori strategy..designed to build a bankwide understanding of the Maori economy"
goodness gracious
Inclusiveness in racism out.
Isn't it racist to assume someone thinks a certain way because of their race. Doesn't it become condescending (and racist) to have a token whoever, assuming they think the same as the other whoevers?
Eg. Let's have a token brown one on the board, you know. To represent the brown ones. Hang on, what about that other shade of brown ones? Bummer, we forgot to include one of the rainbow brown ones. Maybe we need a brown one with disabilities. Have we covered it yet?
Damn, got to repeat it for those Asian ones, cos we all know they think the same, right?
How many spaces on the board again? Oh hell, we haven't even started on the gender diversity yet...you know all those non-binary ones x the shades of colour. Let's see LBGTQI+ XYZ LMNOP x how many racial groups? Good thing we have a big board table and are so self righteously smug that we know people of certain colours/types all think the same.
Reserve Bank getting involved in non central bank issues
And this stinks of disaster capitalism
https://www.rbnz.govt.nz/news/2019/0...stand-together
Link comes back as 404 error.
Another blast at Orr ....he really is a danger and we will all suffer in a couple of years with the approach he’s taking
https://www.euronews.com/2019/04/16/...-foots-markets
For 20k+ posts, you're not usually so deeply concerned, but in this circumstance Orr is really pulling your strings. Would you mind explaining what it is that worries you so much? Do you just not like the guy, or is there something more sinister that you're concerned about?
By his own admission, apparently:
"Calm and unruffled by his critics, Orr, who took the helm in March last year, has said he doesn't want to be seen as predictable nor for markets to simply rote-read his statements."
Perhaps it's the "unpredictable" aspect. RBNZ governors don't usually go out of their way to cultivate that trait.
unpredictable has its benefits in that he wont be obvious and will keep the markets on their toes. predictable rate cuts are food for large players to gobble up.
I concur with Peat here.Good for RBNZ dividends too !
https://www.nzherald.co.nz/business/...ectid=12135573
MPS nxt week. It will be interesting to see if it’s Adrian’s show or will the new Monetary Policy Committee have some input?
An OCR cut looks on the card next week .....but is this laying the foundations for what happened when the then Governor went on a misguided pro growth strategy only resulting in a series of rate hikes and a recession?
I reckon RBNZ not giving likely wage inflation sufficient consideration in their thinking
Only time to tell.
Well, he did cut and says more to come
Good for many now but I fear we will look back in 2021 and say why did he do it.
Must have a different agenda from than just caring for monetary policy.
The Reserve Bank manages monetary policy to maintain price stability, promotes the maintenance of a sound and efficient financial system, and supplies New Zealand banknotes and coins.
1/Price stability by my definition is not pushing the price of everything up by 1-3% per year. Worse they are pushing asset prices up way ahead of general inflation and the price of other goods.
2/Promote the maintenance of a sound and efficient financial system. Is that why the NZ taxpayer provided a guarantee to the businesses in the financial sector in 2008/09. The rate cut is to protect house prices which is the security underpinning the NZ financial system. I would suggest the Reserve Bank is beholden to the financial services industry.
3/Supplies NZ bank notes and coins.
1 out of 3 ain't bad.
Stealing off people who save and invest for the benefit of spendthrifts and gamblers seems wrong to me but what do I know.
It always seems to be a difficult decision to make for a Guvnor, I mean committee, i.e to make a change to the rate rather than just leave it alone.
Wheeler was superbly boring. But Orr probably wants to make his mark and 'show off' just a little, by pre-empting, or 'picking perfectly' (depending on how it all goes) the time to cut. Time will only tell, but Orr has done something! I have actually read the speech yet though I'm very curious about how it will be woven into the world of Tane Mahuta
I reckon it should be called an Orr Put!
I think you know that despite how ‘wrong’ it all is (all the things you’ve talked about that is wrong and will blow up one day), the great reckoning isn’t working out for you so well and you’re more afraid of missing the reckoning than your fear of missing the wealth creation that abject dysfunction is presenting to you.
[QUOTE2/Promote the maintenance of a sound and efficient financial system. Is that why the NZ taxpayer provided a guarantee to the businesses in the financial sector in 2008/09. The rate cut is to protect house prices which is the security underpinning the NZ financial system. I would suggest the Reserve Bank is beholden to the financial services industry.
][/QUOTE]
There was a good reason in 2008/9 to provide that guarantee - charged for, admittedly cheaply as it turned out - at a time when every other comparable Western country had a similar deposit guarantee in place. Not to do so would have risked a massive capital outflow from the NZ financial system/economy. Now that would have been "bad".
Yes it would have been bad, really really bad, the Gummint did what it thought it had to do at the time, perhaps a bit knee jerk and awkward, but saved a ton of folks who would've otherwise been right royally shafted (although disparately lots were shafted that had no choice or say in the matter).
Gummint never gets it quite right, damned if they do, damned if they don't and they suffer the long tail of derision from perfect hindsight with 2020 vision of the perfect present. Despite all that there is no real vision for what might unfold in the future, or policy to avoid, mitigate or minimise the damage from it. History might not repeat as they say, but it does rhyme.
Not sure I entirely understand what you are saying but the thought of missing out on a large fall in asset values has meant watching a lot of wealth creation missed for me and being endlessly frustrated by Central banks ability to keep asset prices inflated at what I think might eventually be at the expense of "the maintenance of a sound and efficient financial system". Unless a "sound and efficient financial system" involves constantly dropping interest rates and printing money to keep asset prices elevated and increasing debt levels.
It would be interesting to know how many on the reserve bank committee are committed to a leveraged investment approach or how many still have a mortgage or have recently helped family into an overpriced house lately.
There was a good reason in 2008/9 to provide that guarantee - charged for, admittedly cheaply as it turned out - at a time when every other comparable Western country had a similar deposit guarantee in place. Not to do so would have risked a massive capital outflow from the NZ financial system/economy. Now that would have been "bad".[/QUOTE]
What interest rates in NZ would have had to rise to attract capital back and NZ house price growth would have been stunted by higher interest rates??
Thinking about it a bit further it might not have just been outflows from NZ but a good number of people in NZ were considering stashing some cash in the mattress which may have created a run on the banks.
We are on a well trod path other countries have already taken. There is already speculation regarding the next steps.
https://www.stuff.co.nz/business/opi...-going-to-zero
I am seriously looking at buying land at a crappy yield just so I have some borrowings and no money in the bank.
You're on to it, Aaron! Call it a capital outflow or a run on the banks - it's the same thing.
:ohmy:
I've said it before call in the loans wipe out the borrowers first, then the shareholders, then the bondholders and if there is anything left afterwards give it to the depositors.
Also not that I like him I see Don Brash is pointing out the blatantly obvious.
https://www.msn.com/en-nz/news/natio...NT9?li=BBqdg4K
The Reserve Bank itself suggests this will reignite housing inflation to about 5 percent per annum," he told The AM Show.
What the Reserve Bank is saying is that houses will continue to rise faster than incomes."
This is seriously f**ked up in my view, that no one seems to give a s**t is hard to believe. I would guess it is because most intelligent people already have a least one house and don't see it as a problem as long as they can help their own kids up onto the property ladder. This leaves a large chunk of the population and young people without parental assistance getting reamed by the reserve bank. I would have thought a left leaning government might comment even though the reserve bank is independent. Any efforts to improve housing or housing affordability in the current financial system is a joke if they are not going to address the root cause of the problem.
His second concern is about what the Reserve Bank could do if a recession occurs, with the rate at the lowest it's ever been there isn't much room to go any lower.
The reserve bank is meeting its inflation targets and unemployment isn't a problem yet they are cutting. I am assuming as long as they are not the evil b**tards I think they are then they might see what I see for the future but they need to extend and pretend rather than allow a correction.
I agree with you that they are not evil b*****ds but they sure are f*****g up the economy with this pro-growth stance / experiment.
Seems rather odd a ‘pro-growth’ cut is needed when their own GDP forecasts have quarterly growth rates averaging 0.8 per cent for the next couple of years. That looks pretty healthy to me.
Never mind Aaron it’s all going to be OK but I’d buy that land pretty quick before it gets too expensive.
That
Too late for that already too expensive it is just a question how far they can take it for how long and maybe "this time is different" we are certainly in a new era. Although I would be interested to compare current central bank policy with that of John Law.
It worked out alright in the end back then with the age of enlightenment but there was a period of adjustment that was unpleasant. Particularly for the French monarchy.
I don't like this latest rate cut either, Aaron. I'd much prefer that the ammo was kept for when it might be needed rather than firing off some now and risking having to resort to such desperate measures as negative rates if things fall apart. It must be said though that the RB rate committee is in a rather tricky hole - the directive is to target inflation within a band, ie there is required to be some inflation. The reason is of course to avoid deflation and the misery that would follow that. I don't envy them.
I think our reasons for not liking the latest rate cut are a bit different. Yours is a disagreement over the timing of the cut. Mine is fury that I am still stuck on the wrong side of this and they are cutting even though their targets have been met. My upset might also be because I lost at tennis last night as well. But guaranteeing house prices keep rising faster than wages is effectively denying the younger generation the same chance of social mobility that previous generations have enjoyed.
Although not specifically how the financialisation of the economy and reserve bank policy is stacking the deck against young peoples futures being on a par with previous generations Bernard Hickey's article highlighted a few other reasons why things won't change. Not at least until it becomes glaringly obvious. More likely life isn't too bad for a majority of NZers so we won't get change.
https://www.stuff.co.nz/business/pro...are-sooo-toast
I see in the paper today immigration is back near its peak before labour came into power. I would guess central bank policy and immigration are just two issues that need addressing before housing affordability for young NZers could be considered to be seriously attempted by government.
My term deposits come off in 5 months and I will be buying either real estate or a portfolio of shares with a small amount of debt. Too bad if my timing is terrible. Extend and pretend can go on for a long time. At a minimum Janet Yellen's lifetime.
thats the consensus a friend (head of research at one of the major NZ investment banks) and i had when discussing it on wednesday, it seemed kinda pointless - I mean, dropping the OCr to stimulate the economy now? - why, why now? and Adrian Orr is a bit of a numpty.
RB Governors always seem to act oddly when there’s a Labour Government
What happened to the RBNZ pro-growth experiment in the early 2000’s .....ended up in tears and a recession (and then we were hit with the GFC the following year)
John Roughan in the herald this morning discussed the committee, which highlighted how little I know about the reserve bank. It sounds like he also can't understand why the cut when targets are being met.
https://www.rbnz.govt.nz/news/2019/0...onomy-and-jobs
https://www.nzherald.co.nz/business/...ectid=12230142
For those with premium access. Sorry I know how frustrated I used to get with links to the NBR.
I can't crack the Herald's paywall but the need for an interest rate cut eludes a lot of us! It's got to be an attempt to boost that stubbornly low inflation rate - and risk the Auckland housing market recovering it's strength.
i think most commentators put it down to the securitization of sub prime mortgage lending.
I blamed Adrian for wanting to make his mark and that may still possibly be a factor but we are not really able to fully apportion blame on him due to the committee decision
Quite a few articles now in the NZHerald Premium questioning this decision. Seems very right to question it to me.
I believe the way to crack the paywall is to pay a measly $10 for the first eight weeks.
Criticism from a former RBNZ official of the bank's capital adequacy proposals.
http://www.sharechat.co.nz/article/7...-official.html
A critic of the RBNZ has his submission blocked as spam ...funny eh
https://croakingcassandra.com/2019/0...sals/#comments
A very interesting submission.
The anti-Australianism alleged in the submission became more pronounced after the turbulence of the 1980's which saw a succession of takeovers: the BNZ purchased/bailed out by the NAB, Trustbank bought by Westpac and, more recently ASB by the Commonwealth Bank and eventually NBNZ, previously British-owned, by ANZ. Prior to the 80's, the Australian influence was balanced by local and British interests but this is now no longer the case and it seems that the RBNZ feels that it is being directed by outside agencies.
Admittedly I don't understand how it all works but my basic understanding is that banks will need to have more equity as a percentage of total assets. This is to reduce risk to depositors who have no govt guarantee or depositors insurance. Doesn't sound like a bad idea to me. But I guess anything that might reduce the increase in debt and asset prices is not a good idea according to economists and banks who are well known for their responsible lending.
I agree with you Aaron
Hypothetical question for anybody interested: What would you say if someone offered you an investment with a promised pre-tax return of close to say 20% pa over many years?.
You mighty say: “How much can I buy?” or like most sensible people: “What is the catch?”
Think about it
I am warming to Adrian Orr, someone prepared to call bull**** on the banks and their whining over capital requirements. This is what I don't like about the news this article highlights bickering but I thought the paragraphs near the bottom held the real news. Sorry just read this again it is not journalism just an opinion piece.
"Orr suggested that the NZBA's submission had claimed that "if banks fail it should be our fault and we should pay them out anyway", something he believed was "astounding""
"NZBA has denied suggesting that the government should ever bail out the banks, saying that instead an independent report merely speculated that in the event of a bank failure
a government would be reluctant to allow customers to take a haircut on their deposits."
So the banks would rather provide "customers" a haircut on their deposits rather than hold more capital to try and deal with a crisis. What a bunch of s**tbags.
https://www.stuff.co.nz/business/113...ose-to-warfare
We can criticise the banks for resisting calls from the RBNZ for increased capital requirements but would do well to remember that the resultant numbers are calculated based on individual banks' lending. Tougher, higher capital levels will inevitably cause banks to be more restrictive in their approval of loans; more risk-averse; more selective in allocating funds to the safer, more profitable business. The days of readily available bank loans may be drawing to a close.
The days of readily available bank loans may be drawing to a close ..... that would be a good outcome eh macduffy
Many banks have a pre-tax ROE approaching 20% - as I said the other day:
What would you say if someone offered you an investment with a promised pre-tax return of close to say 20% pa over many years?.
You mighty say: “How much can I buy?” or like most sensible people: “What is the catch?”
As a depositor with a bank I am overjoyed to hear this. If I was lending the money myself directly and bypassing the bank I would probably want a first mortgage and at least 30% equity from the borrower for a house loan. I don't think I would lend on a business start-up unless they had a house as security.
Although that said I do already know I currently have access to credit if needed so feel for anyone starting out and having to go through the process. If the bank was going to extend me more credit I would hope they would check out my financial situation and make some assessment of how risky the loan might be. Chances are when I finally want to draw down the world will be in crisis and the bank will close the account after having paid them a fee for all these years.
Every time we have re-finance / re-fix our home loan, and the bank tells us what they would be prepared to lend us, it's painfully obvious what the problem is. If we took them up on their offer we would be WAY over extended. It's not very responsible lending, but it also comes down to the individual to have done a budget and know what they can personally afford (is there such thing as personal accountability in this world anymore?)
That unfortunately has been bureaucratically legislated away the last 30 years.
I do think banks though should not be regulated as much but on the flip side should also be allowed to go under and there needs to be more accountability if they bugger up their book by being irresponsible. I guess the banks are in a win/win situation at the moment, being able to use gambling mentality knowing that there is no real accountability if things go tits up.
Agreed, winner, but I'd be more concerned with the effect on business and the economy generally. Let's not go back to the pre-1980's days of periodic credit squeezes and banks having to divert a large chunk of their funding into Reserve Assets, as determined monthly by the RB.Quote:
The days of readily available bank loans may be drawing to a close ..... that would be a good outcome eh macduffy