RBNZ: Stress tests show banks can withstand severe dairy downturn

Reserve Bank of New Zealand said stress tests conducted in banks show these can withstand a severe dairy downturn.

Headlines

NZ agricultural sector highly leveraged, poses structural risk

Stress test shows losses of between 3 to 8 percent of total dairy lending if payout remains low

Banks could write off between 12 to 25 percent of initial dairy lending if payout remains low

Bank losses likely absorbed through lower earnings than erosion of capital