Cut to credit ratings

THE country’s four biggest banks have had their credit ratings downgraded over fears of the overheated Auckland housing market.

Global ratings agency Standard & Poor’s dropped ANZ, BNZ and Westpac’s A- rating to a BBB+ rating, while ASB’s rating was cut from A to A-.

The downgrades were made on the basis that New Zealand’s economic imbalances have created heightened risks in the last three years.

‘‘In particular, we believe that the rapid rise in house prices in Auckland during this period has amplified the risk of a sharp correction in property prices,’’ Standard & Poor’s said.

While unlikely, if a crash were to occur, most financial institutions would be affected, the agency said.

Standard & Poor’s analysts said New Zealand was still a relatively lower-risk banking system by global standards.

The assessment took into account the Reserve Bank’s attempts to rein in the market, which the analysts said had been effective in controlling house prices outside of Auckland.

In the biggest city the measures had only had a temporary effect, with prices resuming their rapid rise after a short period of abated growth.

Standard & Poor’s said low interest rates, housing supply constraints and high net immigration had all contributed to price appreciation.

Several credit unions and smaller finance companies also had their ratings taken down a notch.

However, the credit ratings of the big banks’ Australian parent companies remained unchanged.

State-owned Kiwibank, which has implicit backing from the Government, also escaped the downgrade.

Labour’s finance spokesman Grant Robertson said the Government had ‘‘sat on its hands’’ while a speculative bubble formed in the Auckland housing market.

‘‘Now, just when our economy is suffering the impact of the collapse in dairy prices, our banking sector takes a hit because of the housing bubble,’’ he said.

Just when our economy is suffering the . . . collapse in dairy prices, our banking sector takes a hit. Labour finance spokesman Grant Robertson