Tuesday, March 25, 2008

NZ banking system sound, says Brash

Former Reserve Bank governor Don Brash had some reassuring words today about the New Zealand banking system.

"I would think the New Zealand banking system is as sound as any banking system in the world and, I would argue, probably sounder than most."

He added that New Zealand banks had been "pretty cautious" in their lending practices.

Dr Brash, who was governor of the Reserve Bank from 1988 to 2002, was speaking as the bailout of United States investment bank Bear Stearns continued to cause concern.

Asked if New Zealand trading banks were at risk as a result of the US housing crisis, he replied, "Categorically, they are not . . . [they] have absolutely minimal exposure to sub-prime".

The US credit crisis would, however, affect all households in New Zealand, through even higher interest rates that would reflect the higher cost of borrowing overseas. At present, New Zealand banks fund about a third of their lending from overseas sources.

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