7 Aug 2011

Bollard says NZ bank profits likely to fall

4:59 am on 7 August 2011

Reserve Bank Governor Alan Bollard says although New Zealand banks have remained resilient to the global financial crisis, their profits are likely to fall in the future.

Dr Bollard told the audience at the annual Shareholders' Association conference on Saturday that the operating conditions for banks have changed profoundly.

He says bank balance sheets have shown little growth over the past three years, as people have chosen to curtail debt and save more.

Dr Bollard says if this trend continues, banks will be unlikely to generate the profits they've enjoyed over the past decade.

He says this country's banking system fared better than most during the global downturn, but still needed Government support.

He says the Reserve Bank doesn't believe New Zealand's financial system needs the sort of radical overhaul that has been discussed overseas, but it is supporting global efforts to improve the regulation of banks.

US credit downgrade unlikely to affect NZ

BNZ chief economist Tony Alexander says the downgrade of the US credit rating is unlikely to have much direct effect on New Zealand's economy.

He says it will ultimately lead to slightly higher interest rates and a slightly lower currency for the US, which will not affect New Zealand too much.

Mr Alexander says the revised rating signals the worsening condition in the United States - which could have huge implications if the country goes back into recession.

He says that would mean slower world growth and downward pressure on commodity prices.

Mr Alexander says the United States now has the same credit rating as New Zealand.