The Reserve Bank of New Zealand said on Wednesday that New Zealand's banking system was bearing up well amid the global credit crisis and growing risk of a prolonged global economic downturn.
Delivering its twice-yearly financial stability report, the central bank said banks have sufficient reserves to deal with the inevitable higher loan losses from continued gloomy economic conditions, reported Xinhua.
The bank said local lenders have not suffered the write-downs associated with their overseas counterparts and have high levels of reserves to cope with any losses that may result from the economic downturn.
Reserve Bank Governor Alan Bollard said the main Australian- owned banks, which make up 90 percent of the industry, are well placed to withstand the recession.
The central bank has taken steps to ensure retail banks have access to capital because of the global credit squeeze, including broadening the types of securities it will accept as collateral for loans.
The government has also brought in guarantee schemes for retail and wholesale lending to assure bank customers and overseas lenders.
The Reserve Bank is also talking to the banks about reducing their reliance on short-term wholesale funding, which leaves them vulnerable to turbulence on credit markets.
However, the Reserve Bank expects a slowdown in lending to homeowners and businesses as credit remains scarce, but said that will help increase savings and reduce New Zealand's reliance on overseas lenders.