PHOTO: ROSS GIBLIN/STUFF Banks are fine for now, but a scenario that saw a protracted return to tighter lockdowns could challenge them, the Reserve Bank believes.
Unemployment could rise to 18 per cent, house prices could halve, and the viability of the banks could be “called into question” if the coronavirus prompted a further period of economic lockdowns, the Reserve Bank has warned.
The Reserve Bank said in the central bank’s annual report on financial stability published on Wednesday that banks had coped well with the coronavirus pandemic so far.
But under “severe enough scenarios, the viability of banks would come into question”, it warned.
In the event of its worst-case lockdown scenario “initial modelling suggests that, without significant and timely mitigating actions, banks would fall below minimum capital requirements under this scenario,” it said.
The Reserve Bank has also cautioned that some other financial institutions that take deposits from the public, and some life insurers, are already more vulnerable.
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