WELLINGTON, Nov. 29 (Xinhua) -- New Zealand's financial system remains sound, and risks to the system have reduced over the past six months, Reserve Bank Governor Grant Spencer said on Wednesday when releasing the bank's November Financial Stability Report.
In light of the latest developments, the Reserve Bank is undertaking a modest easing of the loan-to-value (LVR) restrictions starting Jan. 1, 2018, Spencer said, adding that housing market policies announced by the government are also expected to have a dampening effect on the housing market.
"Momentum in the global economy has continued to build over the past six months, reducing near-term risks to financial stability. However, the New Zealand financial system remains exposed to international risks related to elevated asset prices and high levels of debt in a number of countries," the report said.
Domestically, LVR policies have been in place since 2013 to address financial stability risks arising from rapid house price inflation and increasing household debt. These policies have helped improve banking system resilience by substantially reducing the share of high-LVR loans, it said.
Over the past six months, pressures in the housing market have continued to moderate due to the tightening of LVR restrictions in October 2016, a more general firming of bank lending standards and an increase in mortgage interest rates in early 2017, according to the report.
