The banking regulator today released the results of two stress tests it has been undertaking on the banks this year. "In the Very Severe scenario some of the largest banks fell into deficit fairly quickly following the one-month period of our maturity mismatch ratio. The driver of the difference in outcomes between the large and small banks was the difference in funding compositions," the Reserve Bank report notes. The tests revealed banks would be quick to reduce lending in the event of a very severe scenario. Deputy government Geoff Bascand said the liquidity stress test had provided useful insights into the resilience of banks to liquidity shocks and highlighted areas for improvement in banks' internal stress testing capability.

Source: New Zealand Herald December 07, 2021 19:14 UTC