RBNZ Outlines Regulatory Priorities for 2020-2023

By Regulatory News

July 31, 2020

Coronavirus, Climate Risk, Stress Testing

RBNZ released the Statement of Intent for 2020–2023, which details its key regulatory priorities and focus areas for this period. One of the recent focus areas is Phase 2 of the Review of the Reserve Bank Act on the regulation of deposit takers and the introduction of a deposit insurance scheme. In light of the challenges posed by the pandemic, RBNZ has decided to extend the third round of consultation for Phase 2 of the Review of the Act by six months from the original deadline for submissions and the new deadline will be October 23, 2020.

In addition to supporting recovery from the economic impact of COVID-19 crisis, RBNZ is focused on a wide range of initiatives, including assisting the transition to a low-carbon future through the climate change work, preparing for changes to its governing legislation, making the most of opportunities associated with fintech, and collaborating closely with industry, government, and co-regulators in the best interest of all New Zealanders. Work in the area of climate risk involves Climate-related Financial Disclosures proposal, Sustainable Finance Forum Interim Report, National Climate Change Adaptation Risk Assessment/Plan, contribution to a COVID-19 recovery that is cognizant of climate risks and opportunities, and working with stakeholders including the Network for Greening the Financial System, the Sustainable Insurance Forum, BIS, and other international bodies. RBNZ will continue to work closely with stakeholders to identify and remove any unnecessary barriers to new firms entering the system or obstructions for incumbent firms developing fintech solutions. RBNZ will also finish the review of the Reserve Bank Act to put in place a single regulatory regime for all deposit-takers. Additionally, for an initial period of generally six months, RBNZ has deferred the following initiatives and will review and communicate an update on its position later in 2020:

Implementation of planned increases to capital requirements by at least 12 months and imposing dividend restrictions to ensure banks use current capital buffers to support lending
Review of the bank liquidity thematic review (and subsequent review of the liquidity policy
Review of the Insurance (Prudential Supervision) Act 2010
Standard terms for Residential Mortgage Obligations
Cyber resilience guidelines for all regulated entities
Revisions to banks’ disclosure of regulatory breaches
Review of the stress-testing framework and planned bank stress-tests
Revising the process for approving banks’ internal capital adequacy models for credit risk

RBNZ also released the results of a survey assessing the central bank's delivery on the commitments set out in its relationship charter. The results showed banks were generally positive about their relationship with the RBNZ staff, its communications, and its willingness to ask for feedback. RBNZ will be working in the year ahead to respond to the lessons from the survey.

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Keywords: Asia Pacific, New Zealand, Banking, Insurance, Capital Framework, Climate Change Risk, ESG, Fintech, COVID-19, Stress Testing, Basel, RBNZ

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