July 14, 2017

RBNZ is consulting on an issues paper on the review of the capital adequacy framework for registered banks. The consultation is on the type of financial instruments that qualify as bank capital. Important considerations for regulations about bank capital include the RBNZ's regulatory approach, the resolution regime, international standards issued by BCBS, the experience with the current capital regime of RBNZ, and the fact that dominant participants in the New Zealand banking market are subsidiaries of overseas banks. The consultation paper discusses these issues and outlines five options for reforming the existing regulations.

The paper is divided into two parts. Part A provides context for decisions about the regulatory definition of capital and Part B outlines the reform proposals. After outlining the different types of instruments that might constitute bank capital and focusing on a class of instruments known as contingent debt, Part A describes the context for New Zealand’s capital regulations and the country's experience under Basel III. The proposed reforms to capital regulations aim to reduce the complexity of the regulatory regime, provide greater certainty about the quality of capital that banks hold, and reduce the scope for regulatory arbitrage.

 

Related Links

Capital Review Paper 2 (PDF)

Review of the Capital Adequacy Framework

Comment Due Date: September 08, 2017

Keywords: Asia Pacific, RBNZ, New Zealand, Capital Adequacy Framework, Basel III, Banking

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