Tuesday, April 10, 2012

World Banking and Aotearoa

Bankers. Can’t live with ‘em, can’t live...well.

There are 19 banks registered in New Zealand. They are required by law to disclose their financial condition every quarter. Despite a rather big dip in the majority of business earnings, the five biggest banks in Aotearoa increased their profits, from $2.3 billion to 42.5 billion, (that's $2,300,000,000) in the second half of 2011.

The global context revolves around the Basel Committee, in the news for their Basel III agreement which will affect all banks, including the Aussie ones we rely on here in Aotearoa/NZ. They give this succinct summation: “The distinction between market and credit risk has been blurred by the development of credit risk transfer markets and the broad move to mark-to-market accounting for a wide variety of financial instruments. This has raised questions regarding approaches that treat the two types of risks separately. The financial crisis has illustrated how the two risks may reinforce each other and that in such stress situations illiquidity can exacerbate losses.” (See this Working Paper on 'Findings on the interaction of market and credit risk').

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Simon Lambert

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