It follows Reserve Bank’s final decision on bank capital
Federated Farmers is urging trading banks to absorb as much as possible of the additional costs of new bank capital requirements instead of dumping it all on customers.
The Reserve Bank of New Zealand (RBNZ) has decided that the four main banks will now be required to hold a minimum of 18% total capital, while the remaining smaller banks will be required to hold 16%. As a result, it predicts a 0.2% increase in average bank lending rates.
“But the impact on farming is likely to be much higher,” Andrew Hoggard, commerce spokesperson for Federated Farmers, said. “This is because there is less lending competition in the agricultural sector and we know banks are already looking to reduce their exposure to farm debt. Banks have been putting the squeeze on farmers even before today’s announcements by the Reserve Bank.”
Read more: Farmers continue feeling bank pressure – survey
The Federated Farmers November 2019 Banking Survey has revealed that farmers’ satisfaction with their banks in the last six months has continued to drop while the number of those who feel pressure from banks has jumped from 16% to 23%.
"With the average mortgage for all farm types being $3,833,000, and significantly higher for dairy farmers, even a small increase in interest rates hits hard," Hoggard said.
“Farmers are putting banks on notice,” he added. “We want to see fairness in how these costs of bank capital requirements are handled. Kudos to Rabobank, which has already indicated it will absorb the extra costs.”
