The Reserve Bank has continued to note some parts of the dairy sector were highly indebted.
Debt was becoming more concentrated and the sector was therefore vulnerable to shocks.
The bank released its financial stability report (FSR) yesterday noting the country’s financial system remains sound.
Governor Adrian Orr said most dairy farms were cash-flow positive but remained vulnerable to any possible downturn in dairy prices and agriculture shocks.
”Reducing this bank lending concentration risk requires more prudent lending practices.”
ASB chief economist Nick Tuffley said Mycoplasma bovis was one example of a shock for the dairy sector because of its effects on productivity in the sector and on individual farms facing culls.