A few building societies and credit unions may have to merge or restructure, RBNZ says

The Reserve Bank of New Zealand has suggested that a few small building societies and credit unions may have to raise capital to meet new capital requirements being imposed on non banks as the Reserve Bank takes over regulation of sector in the next 18 months. Deputy Governor Grant Spencer told a news conference after the release of the bank's half yearly Financial Stability Report (FSR) that it was possible some building societies or credit unions would have to raise capital. "If you're in a situation in today's marketplace, where you need additional capital then a merger may be the best solution rather than going out and finding new capital directly," Spencer said. "There will be some that will need to find additional capital. A merger is one solution and the other is a restructuring of their own balance sheets to meet the capital adequacy requirement, like restructuring the type of assets they hold," he said. Reserve Bank Head of Prudential Supervision Toby Fiennes said credit unions and building societies were "relatively well positioned for the new regime, so we wouldn't expect a huge number that would need to restructure their capital." Spencer said it was possible more finance companies would collapse or close before the new regime was in place. "We've seen a number close already or go into moratorium. That industry is going through a rationalisation and that will continue and be reinforced by the prudential regime we're putting in place, which will increase minimum safety standards and improve the transparency of the sector which will allow investors to get a better idea of risk and return."