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Speaker 1: So Westpac calling for the Reserve Bank to relax capital requirements. Now,

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Speaker 1: the move would make it easier for banks to give

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Speaker 1: out loans. That's what Westpac thinks, and we'll put New

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Speaker 1: Zealand on par with countries like the UK and Australia.

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Speaker 1: And Chamom bier Lekub is the chief economist at Simplicity

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Speaker 1: and joins me now, Hella Chamaville, good morning. So the

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Speaker 1: bank reckons that reducing the capital of the bank must

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Speaker 1: hold would reduce the costs of a four million dollar

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Speaker 1: farm loan by twenty grand? Are they right?

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Speaker 2: Yeah, it's a bit of right margin. So every time

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Speaker 2: the capital recommend grows up, banks to have to borrow

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Speaker 2: money more expensively, and so it kind of increases mortgage

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Speaker 2: rates by a butt zero point one percent to point

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Speaker 2: one five percent. It's not a huge amount, but it matters.

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Speaker 1: Yes, nobody sneezes at twenty grand. So if if Westpac

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Speaker 1: got its way and there was a reduction of capital,

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Speaker 1: would that make banks more vulnerable at these uncertain times?

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Speaker 1: Because that's why it was put in the first place.

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Speaker 2: Absolutely. I think that's really the big tread of is

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Speaker 2: do we think our banks are unsafe? I think the

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Speaker 2: other way of looking at it is our bank's not

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Speaker 2: making enough money during the good and bad times. I

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Speaker 2: think the answer is they're making great money in great

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Speaker 2: times and in bad times. We just had a terrible

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Speaker 2: recession and they're still made billions of dollars in profits.

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Speaker 1: So would it help the economy recover faster?

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Speaker 2: I don't think so. I don't think the bank capital

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Speaker 2: is the reason why our banks are not lending enough money.

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Speaker 2: There are two things going on. One that our mortgage

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Speaker 2: rates are far too expensive. So on average, banks are

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Speaker 2: charging over two percent over their cost of borrowing, so

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Speaker 2: their mortgage rates are really high. So, for example, the

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Speaker 2: cheapest mortgage ratey can get right now, it's five percent

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Speaker 2: for two years. That's pretty high. You know, our kind

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Speaker 2: of floating rate at the moment is four point ninety

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Speaker 2: five percent, and so we are charging a lot less

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Speaker 2: at simplicity for our floating mortgages, but our banks are

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Speaker 2: still charging pretty big margins. That's the first big issue.

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Speaker 2: And the second is our banks is simply not lending

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Speaker 2: much money to businesses and farms that create long term

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Speaker 2: prosperity in using and that's part to our regulations which

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Speaker 2: helped bat lend more money to mortgages rather than to

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Speaker 2: businesses and farms.

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Speaker 1: So Mabel, I thank you for your time today.

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Speaker 2: For more from Early Edition with Ryan Bridge, listen live

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