Following a High Court decision in which BNZ bank was found liable to pay $416 million in unpaid taxes and a possible $238 million in use of money interest, thoughts have been centered around how this would affect the banking institution. ANZ bank, Westpac and the owner of ASB, the Commonwealth Bank of Australia are all also entangled in discussion with the Inland Revenue Department about owed taxes.

Moody’s Sydney-based assistant vice-president Marina Ip stated that while significant, the decision would not see the bank pay more than 60% of its expected yearly pre-tax earnings. So, individually this will not decrease its rating, although it is admitted that growth will be affected, it will not see the bank become a non-profitable business.

Standard & Poor’s has already confirmed their ratings of the banks, including BNZ post the High Court decision.

Following a High Court decision in which BNZ bank was found liable to pay $416 million in unpaid taxes and a possible $238 million in use of money interest, thoughts have been centered around how this would affect the banking institution. ANZ bank, Westpac and the owner of ASB, the Commonwealth Bank of Australia are all also entangled in discussion with the Inland Revenue Department about owed taxes.

Moody’s Sydney-based assistant vice-president Marina Ip stated that while significant, the decision would not see the bank pay more than 60% of its expected yearly pre-tax earnings. So, individually this will not decrease its rating, although it is admitted that growth will be affected, it will not see the bank become a non-profitable business.

Standard & Poor’s has already confirmed their ratings of the banks, including BNZ post the High Court decision.

Despite warnings earlier this year by credit rating agency Standard & Poor, John Key believes that New Zealand government has changed its economic track enough to ensure that no credit downgrade will occur.

As an indicator of economic stability and certainty, the credit rating has a direct effect in the cost of financing that New Zealand will face. It is therefore in the interest of all New Zealanders that the rating not drops. John Key said, in an interview on TV One show “Breakfast” that such a downgrade would see roughly 2% in interest rates.

John Key has stated previously that the new budget would be a slimmer one then seen previously. Also he claimed that there have been savings and increases in efficiency with government spending, to aid in maintaining a good credit rating while not cutting back in entitlements to New Zealanders.

In an interview with the Financial Times (FT) John Key said that fears of a credit rating downgrade by rating agency Standard & Poor’s from New Zealand’s current AA+, is what is apparently keeping the upcoming New Zealand budget at a constrained level.

As such, there is a need to cut governmental spending and by necessity includes any further financial stimulus for New Zealand. These comments are partnered with an OECD report which states that New Zealand is likely to remain in a recessionary state throughout 2009 and possibly recover “hesitantly” in 2010.