The Reserve Bank of New Zealand published the 2025 bank industry solvency stress test results, assessing how the country’s five largest banks would respond to two severe but plausible scenarios involving geopolitical risks. Across both scenarios, modelled capital ratios fell significantly but remained above minimum regulatory requirements, while liquidity buffers were sufficient to meet stressed outflows despite material declines in liquidity ratios. Scenario 1 modelled a recession driven by a breakdown in trade, disruption to global supply chains and heightened geopolitical instability, with capital taking time and significant actions to rebuild to current levels. Scenario 2 overlaid a cyber-attack that triggered a severe shift of retail deposits to other banks and closed wholesale funding markets to the affected bank for three months, further depleting capital and pushing some banks to take mitigating actions to remain above minimum liquidity requirements; the combined solvency and liquidity stress extended the recovery period and left the affected bank at a disadvantage to peers. The exercise also highlighted the role of the Reserve Bank’s overnight borrowing facility in managing sharp liquidity shocks, noting that as a non-committed facility banks could consider additional mitigating actions, particularly where other financial entities are not under liquidity stress.
Reserve Bank of New Zealand 2025-11-03
Reserve Bank of New Zealand publishes 2025 stress test results showing five largest banks remain above minimum requirements under geopolitical and cyber shocks
The Reserve Bank of New Zealand's 2025 bank industry solvency stress test results show the five largest banks maintained capital ratios above minimum requirements despite severe scenarios involving geopolitical risks and a cyber-attack. Liquidity buffers were sufficient for stressed outflows, with the Reserve Bank’s overnight borrowing facility crucial in managing liquidity shocks.