Evaluation of post-GFC policy response of New Zealand. Banking and macro-prudential perspectives

Author:Syrus M. Islam, Noel Yahanpath
Position:Department of Accountancy and Finance, University of Otago, Dunedin, New Zealand; Business School, Eastern Institute of Technology, Napier, New Zealand
Pages:403-414
SUMMARY

Purpose - The paper aims to evaluate the role played by a recent banking and macro-prudential regime in addressing the financial crisis in New Zealand (NZ). Design/methodology/approach - The basic methodology used in this paper is the “documentary research method”. For this study data have been collected from various published sources. ... (see full summary)

 
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Evaluation of post-GFC policy
response of New Zealand
Banking and macro-prudential perspectives
Syrus M. Islam
Department of Accountancy and Finance, University of Otago,
Dunedin, New Zealand, and
Noel Yahanpath
Business School, Eastern Institute of Technology, Napier, New Zealand
Abstract
Purpose – The paper aims to evaluate the role played by a recent banking and macro-prudential
regime in addressing the nancial crisis in New Zealand (NZ).
Design/methodology/approach – The basic methodology used in this paper is the “documentary
research method”. For this study, data have been collected from various published sources.
Findings – We nd that the NZ government is one of the rst few countries to implement Basel III
to ensure the robustness of its banking sector while calibrating it to the unique needs of the
economy and is in the process of phasing in several macro-prudential instruments (e.g.
countercyclical capital buffer, ore funding ratio, sectoral capital requirement and loan-to-value
ratio) to smooth the credit cycle of the economy. However, implementing different requirements of
a new policy has some challenges.
Research limitations/implications – Further research may be carried out to investigate the policy
responses of the government from corporate governance and other regulatory perspectives.
Practical implications – This study identies the effectiveness, as well as some challenges faced
when implementing different requirements, of the new policy that may facilitate the policy makers to
take appropriate action as required.
Originality/value – This study provides a unique insight into the post-GFC scenario with regard to the
government policy response in the banking sector and macro-prudential system that may provide the world
with a nancial-system warrant of tness. It is one of the very few studies that showcase a global perspective
and, to our knowledge, it is the rst of its kind in NZ in the post-global nancial crisis period.
Keywords Post-GFC, Banking sector, Basel III, New Zealand, Macro-prudential system
Paper type Literature review
1. Introduction
Thecatastrophic and systemic effect of the global nancial crisis (GFC) can be easily
understood by the $50 trillion loss of global wealth from September 2007 to March
2009 (Summers, L.H., March 13, 2009)[1]. To ensure consistency in the global
banking sector, Basel III was introduced in 2010 by the Basel Committee on Banking
Supervision and, since then, it has been gradually implemented in many countries.
In addition, to reduce the systemic effect, as well as to ensure greater nancial
stability, countries across the world are revising and implementing their own
country-specic, macro-prudential policies.
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1358-1988.htm
Post-GFC
policy
response of
New Zealand
403
Journalof Financial Regulation
andCompliance
Vol.23 No. 4, 2015
pp.403-414
©Emerald Group Publishing Limited
1358-1988
DOI 10.1108/JFRC-02-2014-0007

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