27 Oct 2009

Bank deposit rate rises likely to ease

6:35 pm on 27 October 2009

Interest rate rises for bank deposits are expected to ease as a result of a backdown by the Reserve Bank of New Zealand.

The margin paid by banks for customers' deposits has been on the rise since global money markets froze last year.

The prospect of new rules compelling the banks to raise more funds from local depositors has also driven up deposit rates.

Seeking to reduce banks' reliance on volatile international money markets, the Reserve Bank had set down minimum levels for funds raised from local depositors.

The new levels had been set to take effect from January but after protests from the big trading banks the central bank has delayed their full implementation till July 2012.

A PricewaterhouseCoopers banking partner, Paul Skillender, says the earlier implementation would have driven up returns on deposits.

There is now likely to be less competition between the banks for customers' deposits, he says.