Featured Product

    RBNZ Issues Independent Analysis of Capital Review for Banking Sector

    October 01, 2019

    RBNZ released assessment reports, of the three independent international experts, on its Capital Review for banks. Post the fourth consultation on Capital Review, which was published in December 2018, RBNZ commissioned external experts to independently review its analysis and advice underpinning the Capital Review proposals. The reports by these experts will be part of the collection of information considered in the final decision-making process of the Capital Review. The implementation of new capital rules is proposed to start from April 2020, with a transition period of a number of years before banks would need to meet the new requirements.

    The experts were asked to take into account the objectives of the Capital Review as well as the domestic context, the available literature, the international debate, and global policy developments relating to the role of bank capital. Dr. James Cummings, Professor Ross Levine, and Professor David Miles, who provided the independent assessments, offered certain suggestions and concluded that the RBNZ review was balanced, sound, unbiased, and well-reasoned in general. Dr. Cummings suggested that RBNZ should investigate the extent to which the Internal Ratings-Based (IRB) models provide a more accurate prediction of unexpected losses than the standardized models. If the IRB models do not outperform, then the role of IRB should be reconsidered. Additionally, Professor Levine is skeptical about the ability of RBNZ to accurately assess when to turn the countercyclical capital buffer (CCyB) on and off while Professor Miles suggests that RBNZ should consider making the CCyB a part of the rest of the prudential buffer, to remove direct allocation of part of the buffer to the CCyB.

    In response to the assessments, RBNZ will consider all the comments and suggestions of the external experts. The issues raised by the experts will also be addressed in the regulatory impact analysis, including the cost-benefit assessment. RBNZ has a number of processes underway to address the points raised by the external experts as well as points made in submissions on the Capital Review. This includes refining estimates of the costs and benefits of the proposals, considering a range of perspectives about possible interest rate impact, assessing the impact of incentives on the various groups that make up the financial ecosystem, and additional analysis of the definition of capital and processes for determining the level of risk-weighted assets.

    The RBNZ Capital Review is intended to identify the most appropriate framework for setting capital requirements for banks in New Zealand. The review is also considering the way the current framework operates and the international developments in the capital requirements of banks. As part of the Capital Review, which began more than two years ago, RBNZ has, so far, published four consultation papers. The first consultation was an issues paper that discussed, at a high level, the scope and key issues that should be covered by the Review. The second consultation discussed the definition of regulatory capital instruments while the third one addressed questions related to the measurement of risk for bank exposures. The fourth and last consultation so far is titled "How much capital is enough?" and it seeks views on the proposed capital requirements for banks and on the other proposals in the Capital Review to date. 

     

    Related Links

    Keywords: Asia Pacific, New Zealand, Basel, Banking, Capital Review, External Expert Assessment, Capital Requirements, Regulatory Capital, RBNZ

    Featured Experts
    Related Articles
    News

    EC Adopts Financial Reporting Changes Arising from Benchmark Reforms

    EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.

    January 14, 2021 WebPage Regulatory News
    News

    BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk

    BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.

    January 14, 2021 WebPage Regulatory News
    News

    HMT Updates List of Post-Brexit Equivalence Decisions in UK

    HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Issues Erratum for Technical Package on Reporting Framework 3.0

    EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.

    January 14, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQ on Measurement of Credit Risk Weighted Assets

    APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Publishes Risk Dashboard for Third Quarter of 2020

    EBA published the quarterly risk dashboard, along with the results of the Risk Assessment Questionnaire survey among 60 banks and 15 market analysts.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Analysis Shows Privacy as Biggest Concern in Use of Digital Euro

    ECB concluded the public consultation on the introduction of a digital euro in EU.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Finalizes Guide on Supervisory Approach to Bank Consolidation

    ECB published a guide that sets out the supervisory approach to consolidation in the banking sector.

    January 12, 2021 WebPage Regulatory News
    News

    SRB Chair Outlines Work Priorities for 2021

    The SRB Chair Elke König published an article setting out work priorities for 2021.

    January 11, 2021 WebPage Regulatory News
    News

    FDIC Selects Companies to Compete in Final Phase of Tech Sprint

    FDIC has selected 11 technology companies—including BearingPoint, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the third and final phase of the rapid prototyping competition.

    January 11, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6417