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Reserve Bank: Increased risk to financial system 

November 11, 2015

Ranjani Ponnuchetty, 3 News

The Reserve Bank is warning the risk to our financial system has increased in the past six months.

In releasing the biannual Financial Stability report, the central bank's governor Graeme Wheeler says the country's economy continues to perform well despite a deterioration in the outlook for global financial stability and heightened risk related to the dairy and housing sectors.

In May, the Reserve Bank announced new LVR measures to curb house prices in the country's largest city.

Mr Wheeler says a sharp downturn could challenge financial stability given the large exposure of the banking system to the Auckland housing market.

"While it's still too early to judge the effect of the recent policy changes, they are expected to help moderate pressures on Auckland house prices, and will improve the resilience of bank balance sheets to a housing downturn," says Mr Wheeler.

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