Latest news with #KerryWatt
Yahoo
2 days ago
- Business
- Yahoo
Behaviour of aging New Zealanders to impact interest rates, asset prices, RBNZ says
WELLINGTON (Reuters) -New Zealand's savings, borrowing and investment behaviour is likely to change as its population ages, affecting interest rates, asset prices and demand for financial products, New Zealand's central bank said in a report released on Tuesday. Kerry Watt, director of Financial System Assessment at the central bank, said the economic impact will unfold slowly, but financial institutions need to understand and be prepared for the structural changes and potential risks associated with this long-term change. 'Understanding and adapting to these changes will be key to maintaining financial system resilience,' he said. The Reserve Bank of New Zealand report found that overall savings are expected to rise in the near term before declining as people typically borrow when young, save during their working years, and draw down those savings in retirement. 'Increased saving could put downward pressure on interest rates and lift the value of assets like housing and equity. Demand for housing loans may decline as the population ages,' it said. 'Older investors may favour lower risk assets.' Increased deposit funding and reduced demand for mortgages may encourage a shift towards other types of lending and expansion in the provision of other services, the bank added.
Reuters
2 days ago
- Business
- Reuters
Behaviour of aging New Zealanders to impact interest rates, asset prices, RBNZ says
WELLINGTON, July 15 (Reuters) - New Zealand's savings, borrowing and investment behaviour is likely to change as its population ages, affecting interest rates, asset prices and demand for financial products, New Zealand's central bank said in a report released on Tuesday. Kerry Watt, director of Financial System Assessment at the central bank, said the economic impact will unfold slowly, but financial institutions need to understand and be prepared for the structural changes and potential risks associated with this long-term change. 'Understanding and adapting to these changes will be key to maintaining financial system resilience,' he said. The Reserve Bank of New Zealand report found that overall savings are expected to rise in the near term before declining as people typically borrow when young, save during their working years, and draw down those savings in retirement. 'Increased saving could put downward pressure on interest rates and lift the value of assets like housing and equity. Demand for housing loans may decline as the population ages,' it said. 'Older investors may favour lower risk assets.' Increased deposit funding and reduced demand for mortgages may encourage a shift towards other types of lending and expansion in the provision of other services, the bank added.
Scoop
2 days ago
- Business
- Scoop
RBNZ Explores The Impact Of An Ageing Population On The Financial System
New Zealand faces an economic shift as the population ages, according to the Reserve Bank of New Zealand in a Financial Stability Report special topic article released today. While the economic impact will unfold slowly, the Reserve Bank is urging financial institutions to understand and be prepared for the structural changes and potential risks associated with this long-term change, Director of Financial System Assessment Kerry Watt says. 'An ageing population is likely to influence savings, borrowing and investment behaviour. This in turn will affect interest rates, asset prices and the demand for financial products. The overall impacts may be complex and vary over time.' As the population ages, overall savings are expected to rise in the near term before declining. People typically borrow when young, save during their working years, and draw down those savings in retirement. Increased saving could put downward pressure on interest rates and lift the value of assets like housing and equity. Demand for housing loans may decline as the population ages. Older investors may favour lower risk assets. For banks, increased deposit funding and reduced demand for mortgages may encourage a shift towards other types of lending and expansion in the provision of other services. For the insurance sector, demand for health insurance is expected to grow, while demand for life insurance may decline. Demographic change and changes in the levels of savings and borrowing may also affect how monetary policy flows through the economy. In addition, increased expenditure on healthcare and superannuation will impact fiscal policy. 'Understanding and adapting to these changes will be key to maintaining financial system resilience,' Mr Watt says.
The Star
06-05-2025
- Business
- The Star
Rapid AI adoption worries New Zealand central bank
The Reserve Bank of New Zealand (RBNZ) building in Wellington, New Zealand. Photographer: Mark Coote/Bloomberg WELLINGTON: The rapid acceleration of artificial intelligence (AI) adoption in financial services presents a risk to financial stability, the Reserve Bank of New Zealand says in a report. 'Errors in AI systems, data privacy concerns and market distortions could amplify existing risks,' yesterday's report said. 'The growing reliance on a small number of third-party AI providers may also contribute to market concentration, creating new channels for contagion and increasing the potential impact of cyberattacks.' However, it added that AI tools and models were also providing benefits, including improved productivity, greater modelling accuracy, enhanced risk assessment capabilities and strengthened cyber resilience. The report was released ahead of the twice-annual Financial Stability Report, due tomorrow. Kerry Watt, director of financial stability assessment and strategy at the central bank, added in a statement that there is considerable uncertainty around how AI will shape the financial system. 'We will continue to closely monitor developments in AI technology, adoption trends, and the evolving regulatory landscape, to ensure that the financial system remains well-positioned to manage emerging risks,' Watt said. — Reuters
Scoop
05-05-2025
- Business
- Scoop
2024 General Insurance Stress Test Results Published Today
Press Release – The Reserve Bank of New Zealand Capital injections from their parent companies and ongoing availability of reinsurance were identified as critical to enabling insurers to continue to offer cover following such an event. The Reserve Bank of New Zealand has published the results from the 2024 General Insurance Industry Stress Test. The exercise assessed insurers' responses to a major earthquake and severe but plausible cyber-risk incidents. The seismic scenario was based on a magnitude 8.7 earthquake along the Hikurangi Subduction Zone off the east coast of the North Island. The scenario was designed to simulate an event well beyond our solvency requirements to enable testing of insurers' preparedness and recovery plans. This scenario would result in widespread damage and a sharp decline in GDP. Participating insurers modelled property losses of $62 billion, which rose to around $100bn if extrapolated out to cover the whole market. 'Despite the severity of the scenario, policyholder claims would have been met,' said Kerry Watt, Director of Financial Stability Assessment and Strategy. 'This is a sign of the resilience that's been built into the system since the Canterbury earthquakes, including strengthening of solvency requirements, increased coverage by the Natural Hazards Commission and improved loss estimation modelling.' The severity of the test did mean substantial mitigating actions were required to return insurers to required solvency positions. Capital injections from their parent companies and ongoing availability of reinsurance were identified as critical to enabling insurers to continue to offer cover following such an event. The exercise provided valuable insights to feed into our review of solvency standards and our recovery planning. The stress test noted the significant impacts beyond the insurance industry. This includes costs to the Crown through funding of the Natural Hazards Commission and meeting recovery costs for damage to uninsured assets and any economic support programmes. This highlights the importance of the government maintaining sufficient fiscal buffers to manage such shocks. 'The exercise was challenging and required a significant collaborative effort across industry and government. Ultimately, the scenario highlights the importance of all stakeholders, individually and collectively, understanding the risks and preparing for these types of severe events,' said Mr Watt. The stress test also included a number of cyber scenarios, including a major data breach, a critical cloud services outage, and a ransomware attack. Insurers demonstrated resilience to claims arising from large cyber events, though these could have a significant impact on profitability. 'Cyber risks are growing and evolving quickly. This exercise helped insurers identify where they are most exposed, and where more work is needed to understand and model these risks. We encourage the industry to build on these insights to improve resilience in this rapidly changing space,' Mr Watt said. The Reserve Bank will continue to work closely with insurers and relevant government agencies to support New Zealand's preparedness for seismic and cyber risks.
