© 2009 International Monetary Fund WP/09/
224
IMF Working Paper
Asia and Pacific Department
N
ew Zealand Bank Vulnerabilities in International Perspective
Prepared by Ray Brooks and Rodrigo Cubero
Authorized for distribution by Mahmood PradhanOctober 2009
Abstract
This Working Paper should not be reported as representing the views of the IMF.
The views expressed in this Working Paper are those of the authors and do not necessarily represent thoseof the IMF or IMF policy. Working Papers describe research in progress by the authors and are publishedto elicit comments and to further debate.
The global financial crisis is creating stress on banking systems across the world throughfunding and asset quality shocks. This paper combines different stress scenarios, as well ascross-country analysis, to assess New Zealand bank vulnerabilities to the global crisis and thedomestic recession. It finds that a sharp worsening of asset quality would be required toreduce bank capital below the regulatory minimum. On the funding side, a disruption to banks’ offshore funding may put pressure on the exchange rate, but would not trigger asystemic liquidity problem.JEL Classification Numbers: G21, G28, E44, F32Keywords: New Zealand, bank funding, bank asset quality, stress testsAuthor
’
s E-Mail Address: rbrooks@imf.org; rcubero@imf.org
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We would like to thank Jim Gordon, David Hargreaves, Ian Harrison, Mizuho Kida, John Kiff, Li Lian Ong,Michael Reddell, Elod Takats, Alexander Tieman, and seminar participants at the IMF and the Reserve Bank of New Zealand for helpful comments and suggestions, as well as Kessia De Leo, Khoi Nguyen, and RaneeSirihorachai for very able research assistance. All remaining errors are ours.
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