By Stephen Wright 



  WELLINGTON, New Zealand--The resilience of New Zealand's banks will be tested by the coronavirus pandemic, but the overall financial system is in a solid position to weather the economic downturn, the central bank said on Wednesday. 


  Loan losses for banks will rise, but stress tests indicate they can maintain adequate capital even if the economic downturn is worse than current projections, the Reserve Bank of New Zealand said in its twice-a-year review of financial stability. 


  "At the outset of the pandemic the banking system had significant capital and liquidity buffers, built up due to both regulatory requirements and several years of favourable banking conditions," RBNZ said. "These buffers can now be used to support their customers' long-term economic future." 


  New Zealand's banking industry is largely owned by Australia's four main trading banks. 


  The central bank said that some insurers and non-bank deposit takers entered the downturn in a vulnerable position of low profitability and limited capacity to absorb shocks. 


  RBNZ said it expects consolidation to continue among deposit institutions and it is working with insurers to improve their resilience. 


  Write to Stephen Wright at stephen.wright@wsj.com