RBNZ Warns of Rising Risks From US Tariffs

The Reserve Bank of New Zealand (RBNZ) warns that risks to the country's financial system have increased over the past six months, mainly due to heightened global market volatility and escalating geopolitical tensions, particularly from sweeping U.S. tariffs. Despite subdued domestic conditions—including high interest rates, rising unemployment, and a weak housing market—New Zealand's banks remain profitable, well-capitalized, and have strong liquidity buffers. Non-performing home loans have climbed to their highest level in over a decade, but are expected to decline as mortgage rates decrease and borrowing costs fall. Strong agricultural exports are supporting debt serviceability and economic recovery. The RBNZ is reviewing bank capital rules and implementing the Deposit Takers Act 2023 to strengthen financial sector resilience. The central bank also highlights that the direct and indirect impacts of U.S. tariffs could be severe for key export sectors and trading partners.