Under its mandate to maintain our economy’s financial stability, the Reserve Bank of New Zealand (RBNZ) has repeatedly highlighted agri-business lending. It’s expressed concern over the growth of agri-business debt and the effect of volatile commodity prices on how this borrowing is managed.
The RBNZ’s recent changes to bank capital requirements mean banks will need to hold additional capital against lending. The higher the risk profile of the business, the more capital banks must hold against each loan. Over the next seven years, it is likely to increase the cost of lending, but it’s too early to say by exactly how much.
The more understanding and information you have, the better equipped you’ll be to have positive conversations with your bank. That’s why we asked the banks to explain what the changes will mean for you.
Here’s what the five largest rural lenders had to say.
What will this mean for dairy farmers?
Mark Hiddleston, ANZ Bank, managing director commercial & agri


Mark Hiddleston, ANZ Bank.
Dairy farmers can expect continued support from ANZ. ANZ believes in the long term the whole country will benefit from the RBNZ’s changes through a more stable and robust economy.
In the shorter term, farmers will increasingly need to provide us with good quality information, and be able to demonstrate that their farms are worth investing in.
This means they must be more innovative and efficient, looking for improvements in areas such as pasture management, the use of precision farming techniques, while also seeking advances in genetics, pastures, forages and new technology.
Increasingly land values are likely to reflect the efficiency, proven performance and productive capability of the farm.
Making long term plans around the environment, succession and governance will ensure that farmers are better prepared for the ups and downs of the commodity cycle and are more resilient to factors such as severe weather events and shifting consumer preferences.
All those involved in the sector – banks, farmers and shareholders - can expect to carry some of the cost of these changes in the short term.
But ANZ believes the end result, a stable and robust financial system, is ultimately in everyone’s interests.
What will you be looking for when considering funding proposals?


Mark Steed, Westpac NZ.
Mark Steed, Westpac NZ, head of commercial & agribusiness
When considering all funding, we’re assessing the business’s long-term sustainability and its ability to generate sufficient cash surpluses over the life of the lending that:
- covers all interest payments due and,
- repays the principal in the agreed term.
An emphasis is placed on environmental considerations, adherence to regulations and/or any consents required to operate the farming business.
We calculate the minimum principal repayments using a maximum tenure of 25 years.
We also consider:
- the business’s history and principles
- its performance, both productively and financially, and its all-round business acumen
- the nature of the farm and farming system, including physical or environmental challenges
- the quality and performance of the livestock.
We work to understand our customers’ future strategies and aspirations to ensure we continue to provide fit-for-purpose services.
What information should a farmer provide when putting forward a funding proposition, and has this changed?


Tim Deane, ASB Bank.
Tim Deane, ASB Bank, executive general manager business banking
We haven’t changed our credit assessment process, which requires:
- a business plan, including goals and aspirations
- financial statements – demonstrating historical and present performance
- an asset and liability statement – current and projected
- detailed budgets and cashflows demonstrating an ability to withstand adverse movement in key financial drivers e.g. milk price, interest rate and changes to costs
- physical farm data, including production, stocking and farm system information
- risk management and governance policies.
Do you have additional requirements around environmental impacts?


Dave Handley, BNZ.
Dave Handley, BNZ, general manager agribusiness
Farming businesses with strong balance sheets and robust environmental strategies will be well positioned for future success.
We expect our clients to be taking the necessary steps to ensure they’re environmentally compliant. We’ll be working with our customers as they prepare and deliver on their environmental plans.
We strongly suggest you develop a thorough business plan as your roadmap for the future, and consider how your farming operation will make the most of the current good payout to build a more sustainable business (e.g. by reducing debt, making necessary compliance related investments, or whatever else is critical for your future success).
What’s your advice to farmers as they prepare for the 2020 season?


Bruce Weir, Rabobank.
Bruce Weir, Rabobank, general manager country banking
We recommend that farmers build evidence of a clear business strategy showing the intended direction of their business, and how this will be achieved.
Their evidence should include:
- cashflow budgets including any capital development projects
- information relating to how incoming regulation is likely to impact their business, and how any impacts can be mitigated
- completed Farm Environment Plans where applicable.
And, these are the questions they should be asking their bank:
- What is a sustainable level of debt for my business?
- If I want to grow my business, what do I need to do?
- Where can I access relevant information?
- Are there additional sources of advice/training/support I should tap into?
- How can I upskill myself and my staff to tackle future challenges?
Looking for tools and resources to help you demonstrate anything mentioned above? DairyNZ has a range of business planning and budgeting tools free to use – visit dairynz.co.nz/business
This article was originally published in Inside Dairy March 2020