NZ Banks

PHOTO: STACY SQUIRES/STUFF Banks are strong enough to cope with a doubling of bad debts.

A possible doubling of defaults by households and businesses on their bank loans is being tipped as a coronavirus-created recession begins to bite.

Despite the predicted surge in bad debts, Australian banks and their New Zealand subsidiaries have enough capital to weather the storm, said international credit rating agency Standard & Poor’s.

There was uncertainty over exactly how bad credit losses would be in New Zealand following the announcement of the Government’s $12.1 billion economic stimulus package, said S&P banking analyst Sharad Jain.

Depositors can be confident their money is safe.
LAWRENCE SMITH/STUFFDepositors can be confident their money is safe.

“The credit losses could double,” said Jain. “They have been running at very low levels for the last several years, much below what we would expect to be the long-term average.”