This week and the last, the Reserve Bank of New Zealand published two speeches discussing the strength of our financial system. It has been a while that I heard Geoff Bascand and Toby Fiennes on this topic, their speeches were as welcome as they were overdue. Geoff encouraged banks to be courageous. To support the… Read More Balls please, no horses
Yesterday’s interest.co.nz featured an article summarising the work the RBNZ has done to support our economy. The article shows a long list of actions taken by the Reserve Bank, and yes, it looks impressive. On the other hand, the text appears to serve as a mouthpiece for Assistant Reserve Bank Governor Christian Hawkesby, offers little… Read More On bank capital, what should the RBNZ do now?
Fragile by design Banks are fragile by design*. They have lots of debt, equity is only a fraction of total assets, depositors can withdraw their money on the drop of a hat. If depositors want their money back then there is a first-come-first-served rule, which differs from non-bank, corporate (orderly) bankruptcy, where creditors know their… Read More Max Headroom