New Zealand’s financial system remains sound, and well placed to support the expansion in the economy, Reserve Bank Governor Graeme Wheeler said today when releasing the Bank’s May Financial Stability Report. However, Mr Wheeler warned several risks to the financial system require continued focus. “Debt in the household sector remains high relative to income, and house prices are overvalued on several measures. As a result, financial stability could deteriorate if there is a sharp correction in house prices, particularly if accompanied by a reduction in debt repayment capacity.” The Reserve Bank introduced ... (full story)