Reserve Bank governor Adrian Orr says he's not surprised, but has not been impressed with, the level of opposition he is seeing to proposed changes to bank capital ratios.
Speaking at a media lunch hosted by health insurer nib, Orr outlined the Reserve Bank's motivation for seeking to lift bank capital requirements and discussed the difficulties of engaging the broader public in what is seen as a complex issue.
The Reserve Bank is proposing a lift in the amount of risk weighted capital retail banks hold, from 8.5 per cent to 16 per cent.
The proposed increase is designed to make banks safer and better designed to handle periods of financial stress by holding enough capital to reduce the probability of a financial crisis in New Zealand to a one in 200-year event.
The banks aren't happy, calling it overly conservative and warning it could limit the availability of credit in some sectors of the economy and increase interest costs for borrowers.
In its submission to the Reserve Bank, Westpac has argued the proposals "go significantly further than is required" and go "well beyond international norms".
It warned that the changes could add 1 per cent to mortgage rates.
"It is a continuous challenge for us to make it clear to people, in a way they understand, what we're doing, why we're doing it," Orr said.
"With capital there will be some winners and there will be some losers but a lot of that is transferred between groups. You've got shareholders, customers and you've got the public of New Zealand as taxpayers ... and you've got future generations."
The debate was dominated by current shareholders talking to current customers.
ANZ resignation call: Knighthood puts target on Key's back
RBNZ appoints three independent experts to review bank capital proposals
"A lot of people just aren't represented in that room and some never will be because they are always in the future," he said.
"With capital [changes] there will be some winners and some losers but a lot of that is a transfer between groups," he said.
Orr described the notion that the major banks "sailed through the GFC" as a popular myth that had taken hold with the general public.
In fact sailing through had involved a $133 billion overnight guarantee, an $8b direct asset purchase by the Reserve Bank to provide liquidity, a $10b wholesale underwrite and a drop of the OCR by 5.75 per cent.
He said he would like to see a broader public discussion around the national risk appetite.
Orr said he had expected the strong critical response from the banks because he was aware of "the capability and resource" within the industry to lobby for the status quo.
"It is a very, very powerful industry."
But he said he had been surprised by the personal attacks and "the underlying venom" that had come from the broader financial sector - including bloggers, think tanks and some sections of the media.
"We're not trying to win votes, we're not trying to be popular, we're just trying to make sure people understand why we exist and the context."
It was important the Reserve Bank maintained a social licence to operate, he said.
"If your only licence to operate is legislation then you're a gone-burger."