Photo:
Banks are unlikely to be caught by rising interest rates which have led to the collapse of two US regional banks, the Reserve Bank says.
Silicon Valley and Signature banks were sunk by a run on funds after the rise in interest rates exposed them to massive losses.
But ahead of the six monthly financial stability report due out on Wednesday, the RBNZ has published an advance excerpt saying New Zealand banks have relatively little interest rate risk.
"Banks use strategies such as matching the repricing maturities of assets and liabilities to mitigate interest rate risk," the excerpt said.
It gave the example of a one-year fixed rate mortgages being matched with one-year fixed rate funding, such as a term deposit, along with the use of interest rate swaps, futures and forward contracts to hedge any remaining repricing mismatch in their exposures.
"These strategies can help banks manage the impacts of interest rate changes on their balance sheets. In New Zealand, both of these strategies are commonly used to control risk."
It said protections for bank finances had been strengthened after the 2008 global financial crisis with banks required to hold more capital to cover possible losses, and to value their liquid assets at market prices not at book value.
