1
00:00:00,080 --> 00:00:01,760
Speaker 1: So change a plan for the Reserve Bank will have

2
00:00:01,840 --> 00:00:04,360
Speaker 1: new rules run capital levels for retail banks. This is

3
00:00:04,360 --> 00:00:06,600
Speaker 1: how much they have to set aside just in case.

4
00:00:06,680 --> 00:00:08,440
Speaker 1: The argument from the government of the banks is, of

5
00:00:08,440 --> 00:00:11,440
Speaker 1: course it's set too high, therefore it constrains growth. Neil

6
00:00:11,480 --> 00:00:13,560
Speaker 1: Quigley is the Reserve Bank Board chairing us with us.

7
00:00:13,560 --> 00:00:16,720
Speaker 1: Neil morning, Good morning Mike. Were you brought to this

8
00:00:16,800 --> 00:00:17,720
Speaker 1: kicking and screaming?

9
00:00:19,360 --> 00:00:22,880
Speaker 2: No. Several elements of this were reviews that we had

10
00:00:22,880 --> 00:00:26,239
Speaker 2: planned for some time and they reflect the fact that

11
00:00:27,120 --> 00:00:31,639
Speaker 2: with the passage of the twenty twenty three Deposit Takers Act,

12
00:00:32,240 --> 00:00:36,800
Speaker 2: the Bank was getting new supervision and crisis management powers.

13
00:00:37,159 --> 00:00:39,880
Speaker 2: And of course the offset for us having greater powers

14
00:00:39,880 --> 00:00:43,440
Speaker 2: than the regulatory frame potentially is that we need the

15
00:00:43,479 --> 00:00:45,640
Speaker 2: banks to hold less capital as a result.

16
00:00:45,800 --> 00:00:47,760
Speaker 1: And so when we says capital how much less and

17
00:00:47,760 --> 00:00:48,760
Speaker 1: when do we know the number?

18
00:00:50,159 --> 00:00:53,519
Speaker 2: Well, we're in a consultation process and we've offered up

19
00:00:53,880 --> 00:00:58,280
Speaker 2: two different options, one which would increase the total loss

20
00:00:58,320 --> 00:01:02,200
Speaker 2: absorbing capacity in this system and take some of the

21
00:01:02,240 --> 00:01:06,480
Speaker 2: pressure of the most expensive forms of capital for the banks.

22
00:01:06,959 --> 00:01:11,039
Speaker 2: So it'll be late in the year before we have

23
00:01:11,080 --> 00:01:11,920
Speaker 2: a final decision.

24
00:01:12,040 --> 00:01:14,360
Speaker 1: Having had you guys on before, and having had retail

25
00:01:14,360 --> 00:01:17,160
Speaker 1: banks on many time, never the twain shall meet. It

26
00:01:17,240 --> 00:01:19,360
Speaker 1: is your fault that they can't do more in their

27
00:01:19,360 --> 00:01:20,959
Speaker 1: margins are so high, true or.

28
00:01:20,959 --> 00:01:27,560
Speaker 2: Not, well, we don't expect that this review will result

29
00:01:27,680 --> 00:01:32,640
Speaker 2: in big changes in pricing. It may have some impact,

30
00:01:32,360 --> 00:01:38,080
Speaker 2: but of course our main mandate is to focus on

31
00:01:38,560 --> 00:01:41,640
Speaker 2: stability in the financial system, and we need to have

32
00:01:41,880 --> 00:01:45,039
Speaker 2: regard to that above all other consideration.

33
00:01:45,200 --> 00:01:49,000
Speaker 1: Didn't the GFC and COVID tell us that banks are fine.

34
00:01:50,120 --> 00:01:54,800
Speaker 2: The GFC and COVID told us a lot about the

35
00:01:54,840 --> 00:01:58,920
Speaker 2: ways in which problems can arise in the financial system internationally,

36
00:01:59,400 --> 00:02:02,560
Speaker 2: And the prom with each past crisis is that the

37
00:02:02,640 --> 00:02:05,080
Speaker 2: next one will never look exactly the same as the

38
00:02:05,120 --> 00:02:05,680
Speaker 2: last one.

39
00:02:05,760 --> 00:02:08,600
Speaker 1: But in both they did fine. They did more than fine.

40
00:02:08,639 --> 00:02:09,919
Speaker 1: Their rolling in low.

41
00:02:11,280 --> 00:02:14,280
Speaker 2: Well, they did fine in those cases for a variety

42
00:02:14,320 --> 00:02:18,120
Speaker 2: of reasons. So in this case, though, we think it

43
00:02:18,200 --> 00:02:23,320
Speaker 2: is important that we maintain a print level of capitalization,

44
00:02:23,720 --> 00:02:27,000
Speaker 2: particularly for our systemically important banking institutions.

45
00:02:27,040 --> 00:02:30,680
Speaker 1: When you see something change, for example, in the rural sector,

46
00:02:31,639 --> 00:02:34,040
Speaker 1: the retail bank will see the rural sector of something

47
00:02:34,080 --> 00:02:36,200
Speaker 1: slightly different. Now because of your changes.

48
00:02:36,840 --> 00:02:39,600
Speaker 2: Well, One of the implications of what we're doing is

49
00:02:39,639 --> 00:02:44,320
Speaker 2: that we're reviewing the individual loan category risk weights as well,

50
00:02:45,000 --> 00:02:47,919
Speaker 2: and that may well have an impact on some pricing

51
00:02:48,520 --> 00:02:53,360
Speaker 2: in different categories, particularly for the lower risk loans in

52
00:02:53,400 --> 00:02:58,280
Speaker 2: each category, such as rural or housing lending. You might

53
00:02:58,320 --> 00:03:03,000
Speaker 2: see some impact on pricing across the board. It is

54
00:03:03,080 --> 00:03:05,560
Speaker 2: unlikely to be more than about five percent.

55
00:03:05,720 --> 00:03:07,480
Speaker 1: Okay, i'm reading, well, I've got you. I was reading

56
00:03:07,520 --> 00:03:10,960
Speaker 1: yesterday about your expansion in the Auckland real estate market.

57
00:03:11,040 --> 00:03:13,280
Speaker 1: Do you need all that space now you're laying people off.

58
00:03:14,800 --> 00:03:18,160
Speaker 2: Well, we do need the space because we have some

59
00:03:18,240 --> 00:03:22,800
Speaker 2: problems with our building at number too, the terrace. And secondly,

60
00:03:23,520 --> 00:03:27,520
Speaker 2: our expansion in staffing is likely to be focused on

61
00:03:27,600 --> 00:03:31,280
Speaker 2: Auckland because that's where the institutions that we need to

62
00:03:31,280 --> 00:03:35,480
Speaker 2: regulate are mostly located. So we see some expansion in

63
00:03:35,520 --> 00:03:39,600
Speaker 2: the Auckland space. The need potentially to decant some of

64
00:03:39,640 --> 00:03:42,560
Speaker 2: our space at number two the Terrace in the future

65
00:03:43,200 --> 00:03:46,440
Speaker 2: to deal with some remediation issues for the building. So

66
00:03:46,520 --> 00:03:48,040
Speaker 2: that's why we've gone in that direction.

67
00:03:48,160 --> 00:03:50,000
Speaker 1: Okay, how close are you to a new governor.

68
00:03:52,160 --> 00:03:55,680
Speaker 2: Well, we're well down the track with the process and

69
00:03:56,120 --> 00:03:58,600
Speaker 2: so I doubt that you'll be kept waiting for too long.

70
00:03:58,640 --> 00:04:03,520
Speaker 1: One days, weeks, where are we now?

71
00:04:03,960 --> 00:04:04,480
Speaker 2: Weeks? Shit?

72
00:04:04,960 --> 00:04:07,640
Speaker 1: All right, nice to talk to you, slightly awkwardly from mom,

73
00:04:07,720 --> 00:04:10,640
Speaker 1: didn't it now? Neil Quigley, the Chairman of the Reserve Bank.

74
00:04:11,000 --> 00:04:13,920
Speaker 2: For more from the mic Asking Breakfast, listen live to

75
00:04:14,040 --> 00:04:17,080
Speaker 2: news talks. It'd be from six am weekdays, or follow

76
00:04:17,120 --> 00:04:18,719
Speaker 2: the podcast on iHeartRadio.