Renewed house price momentum in New Zealand, accompanied by record household debt, is again raising the risks to the NZ banking system's financial stability. That's according to a new report from S&P Global Ratings, which states that "the Reserve Bank of New Zealand finds itself preparing for a third round of macroprudential limits in an attempt to again curtail growing housing imbalances."And while some indicators of financial stability have improved since the RBNZ embarked on macroprudential intervention in 2013, their effect has been narrow as housing-related imbalances continue to build, highlighting the challenge facing the regulator as numerous cyclical and structural impediments, most outside of its control, remain unaddressed." In the report, its latest Banking Industry Country Risk Assessment report for New Zealand, S&P Global Ratings says: "We consider that New Zealand's resilient economy, conservative banking regulation, and low risk-appetite support its banking sector." "In our opinion, partly tempering these strengths are the country's moderately high private-sector debt; material dependence of the banking system on offshore and wholesale funding; imbalances resulting from strong growth in private sector debt and house prices; and New Zealand's high external debt and current account deficit."In a further statement, also distributed yesterday, the agency said that the economic risks facing financial institutions in New Zealand have heightened. "Continued strong growth in residential property prices nationally (estimated to have increased in excess of ten per cent annually) coupled with an increase in private sector credit growth (from about 152 per cent of GDP in 2015 to about 157 per cent of GDP in 2016) have driven the increased risks in our view," S&P said."Consequently, we believe the risk of a sharp correction in property prices has further increased and, if it were to occur -with about 56 per cent of registered banks' lending assets secured by residential home loans - the impact on financial institutions would be amplified by the New Zealand economy's external weaknesses."In our base case, we expect that for all the financial institutions we rate in New Zealand, capital levels - with the exception of ASB Bank and Rabobank New Zealand - would remain above the levels needed to maintain their current SACPs, albeit with some weakening."