However, she had no timeframe for when such a database might be established.
“This is a looming issue for banks,” Watson said.
“We’re working on it collaboratively to the extent we can.”
Similarly, BNZ chief executive Dan Huggins last week told the Herald issues around insurance retreat needed addressing longer-term, over the next decade.
“There isn’t a near-term issue in the book... We’ve got some time here,” Huggins said.
Watson recognised ANZ will check a property is insured when someone comes to take out a mortgage. But it doesn’t always know whether the borrower is renewing their cover every year.
She said ANZ has wanted this information for some time, as it would enable the bank to better understand and manage its risk.
Nonetheless, she stopped short of saying ANZ intended to charge owners of higher-risk properties higher interest rates.
While insurers are increasingly refining their pricing based on risk - particularly flood risk - Watson said a move towards more risk-based pricing wasn’t on the cards for now.
“It’s not imminent. It’s certainly one of the possibilities out there,” she said.
“There’s a much wider conversation that has to go on across society that isn’t just, ‘The bank’s going to whack up your interest rate’.”
While the Reserve Bank dedicated a chapter of its biannual Financial Stability Report to the issue of insurance retreat, its deputy governor Christian Hawkesby didn’t go so far as to suggest banks should, or would, start charging owners of risky properties higher rates of interest.
He said gathering information about the insurability of a property through the life of a loan is the “first step”. Thereafter, managing the risk “may incorporate some element of pricing”.
Hawkesby said risk-based pricing could strengthen the financial system in the long run.
For example, it could deter someone from building a house in a flood-prone area, and ensure risk is allocated to the entity best placed to absorb it.
Coming back to Watson, she said ANZ endeavoured to make good decisions about who it lends to from the get-go.
“We don’t lend to houses, we lend to people,” she said, noting the bank was still interested in a mortgage applicant’s income and ability to service their debt.
She was wary of the impact high interest rates are having on ANZ New Zealand‘s customers, 17 per cent of whom are yet to roll on to interest rates above the 5 per cent mark.
“The number of customers falling behind on their repayments is rising,” Watson said, pointing out the bank has increased the amount set aside for potential bad debts by $13 million, increasing its total credit impairment provisions to $870m.
Nonetheless, the value of ANZ New Zealand’s actual credit impairments fell to $33m in the six months to March.
Its statutory net profit after tax for the half-year period rose by 4 per cent compared to the same period last year, to $1.038 billion.
Meanwhile, its net interest margin fell by 11 basis points to 2.56 per cent - a level that’s high by historical New Zealand banking standards and compared to ANZ Australia’s retail business, which reported a net interest margin of 1.94 per cent.
While savers are shifting their funds from transaction accounts to term deposits, which are paying relatively high rates of interest, Watson recognised the portion of savings in term deposits hasn’t returned to pre-Covid levels.
She believed savers wanted to keep their money liquid, given all the uncertainty in the economy.
Watson assured ANZ is providing its customers with sufficient information and prompts to help them get the most from their savings in the current high interest rate environment.
Jenée Tibshraeny is the Herald’s Wellington Business Editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
