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

Abstract

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.

Findings

We find that the NZ government is one of the first 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 identifies 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 financial-system warrant of fitness. It is one of the very few studies that showcase a global perspective and to our knowledge it is the first of its kind in NZ in the post-global financial crisis period.

Citation

Islam, S.M. and Yahanpath, N. (2015), "Evaluation of post-GFC policy response of New Zealand: Banking and macro-prudential perspectives", Journal of Financial Regulation and Compliance, Vol. 23 No. 4, pp. 403-414. https://doi.org/10.1108/JFRC-02-2014-0007