RBNZ Bank Financial Strength Dashboard: How Helpful is it?

RBNZ Bank Financial Strength Dashboard_ How Helpful is it

Discover what the RBNZ Bank Financial Strength Dashboard is. Can it help you pick a “safe bank”?

 

Hopefully by now you are aware that there is no deposit insurance in New Zealand banks. So if a bank fails in New Zealand you as a depositor run the risk of losing part or all of your savings in the banks. See: Bank Failures | Could they happen in NZ | The Reserve Bank thinks so

So it does make sense to know what the financial strength of your bank is.

To assist with this, the Reserve Bank of New Zealand (RBNZ) has just released a new tool – The RBNZ Bank Financial Strength Dashboard.

Here’s a short promo video ad we saw while watching something else on youtube.

Until now all you could do was check the 6 monthly updated General Disclosure Statement released by each bank. Then go through the balance sheet and financial statements contained in these for each bank and try to make a comparison. Maybe an option if you were an accountant. But for the average Kiwi not an easy task!

 

What is the Bank Financial Strength Dashboard?

The RBNZ has instead launched a website that summarises key data of each bank in New Zealand. The dashboard allows you to make a comparison of various measures between all the banks in New Zealand.

The dashboard also includes a profile page for each bank. In time this will show the change in various measures from quarter to quarter for each bank.

 

What Does the Bank Financial Strength Dashboard Measure?

The Bank Financial Strength Dashboard measures:

  • Capital adequacy
  • Asset quality
  • Profitability
  • Balance sheet
  • Liquidity
  • Credit concentration

You can view videos explaining each of these measures. An example is the video below explaining capital adequacy.

Interest.co.nz has also released their own simplified version of the RBNZ tool. Instead focusing on simple comparisons between three banks at once. See: https://www.interest.co.nz/saving/bank-financial-comparator

 

Here’s Why the RBNZ Bank Financial Strength Dashboard May Still Not Help You

Looking at the 6 metrics listed above one thing is noticeable. There is very little difference in most of the measures between the top 5 banks in New Zealand. So even using the dashboard it may be difficult to pick a “safer” bank.

Capital_Adequacy_Ratio_NZ_Bank_Financial_Strength_Dashboard

 

One view would be that New Zealand banks are amongst the safest in the world. So there is not much risk.

However New Zealand does have a highly concentrated banking system. Where just a few banks, control most of the market.

As we’ve commented previously, the greatest risk to New Zealand banks would come from an offshore event, affecting the flow of credit into New Zealand (which we require given that we borrow much more than we save).

So if one New Zealand bank was in trouble it would be highly likely that a number of them may be experiencing similar problems. In short, a problem big enough to affect one bank might well affect them all.

 

If You Can’t Pick a “Safe Bank” What Should You Do?

As we said already this week when discussing Kiwisaver and bank bail ins, when making any investments it’s wise to have some financial insurance. We don’t mean life insurance but rather physical gold and silver. See: Why Gold Bullion is Your Financial Insurance

Because gold and silver are the only financial assets that have no counter-party risk. That is unlike deposits in a bank, gold and silver are not at the same time someone else’s liability.

Become your own central bank and buy and hold some physical gold or silver to offset any investments you have.

Buy gold or buy silver here today.

Read more: Should I Buy Gold or Silver? 7 Factors to Consider in Gold vs Silver

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One thought on “RBNZ Bank Financial Strength Dashboard: How Helpful is it?

  1. Pingback: RBNZ Bank Dashboard: Why it May Not Help You Pick a Safe Bank - Gold Survival Guide

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