Governor urges banking standard leeway
Reserve Bank governor Graeme Wheeler has called on bigger countries to recognise the need for small nations to deviate from the norm when implementing global banking standards.
Central bankers, supervisory authorities and commercial bankers from many countries attended the 10th Asia-Pacific high-level meeting on banking supervision in Auckland this week.
The meeting was closed to the public but in a speech just released, Wheeler highlighted the differences between small open economies and the more complicated banking structures of bigger nations.
Smaller economies were more vulnerable with credit risks usually concentrated in just a few sectors.
They also usually had less sophisticated financial market infrastructures and less complicated bank balance sheets, and a large portion of the banking system could be foreign owned.
Small economies also usually had a shortage of highly-rated liquid assets.
As a result, they did not always implement global banking standards in the same way, to protect their national interests.
New Zealand, for example, relied on short-term lending from offshore and had developed bank liquidity requirements ahead of the international standard Basel III, ‘‘but they achieve very similar outcomes’’.
New Zealand had also used Basel capital frameworks to help it manage the large risks it ran from farm lending losses.
Wheeler noted big countries often played a supervisory role, in peer reviews and as regulators of international structures.
‘‘Large countries should support the approaches taken by smaller countries to implement reforms – when they support the intended outcomes of global standards, but in ways that may deviate from large country norms in order to meet local country conditions.’’