Homeowners may already be subsidising farmers as banks eye big losses in the dairy sector.

With the Reserve Bank warning that the five major rural lenders face a collective earnings hit of up to $3 billion over the next couple of years, this week's reluctance to pass on the full official cash rate cut to mortgage holders is hardly surprising.

As the dairy crisis eats away at profits we are likely to see even more upward pressure on rates and fees for regular customers.

It is reassuring that the Reserve Bank's stress tests have found our banks are strong enough to survive this downturn. But even the Reserve Bank's best case scenario is picking farms prices to fall a further 20 per cent (and they are already off nearly 20 per cent since their 2014 peak). Forcing farmers to sell up is something banks will be doing everything they can to avoid.

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The more farmers sell the lower land prices will go and the lower the potential return to the banks will be.

Farmers and their bankers will be working on all sorts of low-interest or interest-only payment plans to avoid mortgagee sales.

Even so the Reserve Bank estimates the banks will face losses of between 3 and 8 per cent of their total dairy exposure. That's between $1 billion and $3 billion based on total dairy debts of $38 billion. And that would likely be absorbed through lower bank earnings, the Reserve Bank says. That could represent a sizeable cut to bank profits over the next couple of years.

If there is any upside it is the reminder the banks are expected to cope relatively well with the downturn.

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Yesterday we saw rural banking specialist Rabobank post a 26 per cent decline in annual profit and writing off $32 million in bad loans. The other four banks in the Reserve Bank's modelling, ANZ, ASB, Westpac and BNZ, are our big mortgage lenders.

The response inevitably, and from a shareholder point of view, quite prudently must be for them to trim costs and lift margins where they can.

Politicians have called on the banks to pass on the OCR cuts in full. The same politicians are calling on the banks to look after farmers.

The reality, given banks' first responsibility is to their shareholders, is that the latter is more likely than the former.

If there is any upside it is the reminder the banks are expected to cope relatively well with the downturn. As with the GFC this slump will serve as a reminder of how lucky New Zealand is to have a strong banking sector, however much the daily price we pay for it may annoy us.