Featured Product

    RBNZ Releases Final Decisions Related to Capital Review for Banks

    December 05, 2019

    RBNZ released a paper that sets out its final decisions following the comprehensive review of its capital framework for banks, known as the Capital Review. The expected impact of the decisions under the Capital Review is outlined in the Regulatory Impact Assessment accompanying the paper. The key decisions, which start to take effect from July 01, 2020, involve increase in the total capital from a minimum of 10.5% to 18.0% for the four large banks (ANZ, ASB, BNZ, and Westpac) and 16% for the remaining smaller banks. The average level of capital currently held by banks is 14.1%. RBNZ also published a go-to-guide and questions and answers (Q&As) related to the capital review.

    The following key decisions have been taken:

    • The minimum capital ratio would be significantly increased, to improve the resilience of New Zealand’s banking system
    • What is acceptable as the "middle tier" of capital would be expanded to provide banks with greater flexibility
    • The lowest tier of capital would remain in the framework
    • The large four banks could not have capital lower than 85% of what they would have if they used the RBNZ models to measure capital

    Relative to the initial proposals of RBNZ, the final decisions also include:

    • More flexibility for banks on the use of specific capital instruments
    • A more cost-effective mix of funding options for banks
    • A lesser increase in capital for the smaller banks consistent with their more limited impact on society should they fail
    • A more level capital regime for all banks—with the four large banks having to measure the risks of their exposures (lending) more conservatively, more in line with the smaller banks
    • More transparency in capital reporting

    The adjustments to the original proposals reflect the analysis and industry feedback over the past two years. All of these changes will be phased in over a seven-year period, rather than over five years as originally proposed, to reduce the economic impact of these changes. During the course of the Capital Review, RBNZ had released four consultation papers. The first consultation asked what topics should be considered as part of the Review and also set out six high-level principles for the Review. The second consultation asked what should be eligible as bank capital while the third one asked how to measure a bank’s assets. The fourth and last consultation proposed that the minimum capital ratio be increased significantly. The extensive consultation process over 2.5 years has involved a submissions process that attracted more than 200 responses, many meetings with the public and industry groups, and an independent international review by three industry experts. 

     

    Related Links

    Effective Date: July 01, 2020

    Keywords: Asia Pacific, New Zealand, Banking, Capital Adequacy Framework, Capital Review, Basel III, Q&A, Regulatory Capital, RBNZ

    Featured Experts
    Related Articles
    News

    PRA Consults on Implementation of Certain Provisions of CRD5

    PRA, via the consultation paper CP12/20, proposed changes to its rules, supervisory statements, and statements of policy to implement certain elements of the Capital Requirements Directive (CRD5).

    July 31, 2020 WebPage Regulatory News
    News

    EIOPA Report Identifies Key Financial Stability Risks for Insurers

    EIOPA published the financial stability report that provides detailed quantitative and qualitative assessment of the key risks identified for the insurance and occupational pensions sectors in the European Economic Area.

    July 30, 2020 WebPage Regulatory News
    News

    EBA Publishes Risk Dashboard for First Quarter of 2020

    EBA published its risk dashboard for the first quarter of 2020 together with the results of the risk assessment questionnaire.

    July 30, 2020 WebPage Regulatory News
    News

    EBA Issues Updates on Stress Test Exercise for Banks in EU

    EBA announced that the next stress testing exercise is expected to be launched at the end of January 2021 and its results are to be published at the end of July 2021.

    July 30, 2020 WebPage Regulatory News
    News

    PRA Proposes Guidance Related to Matching Adjustment under Solvency II

    PRA published the consultation paper CP11/20 that sets out its expectations and guidance related to auditors’ work on the matching adjustment under Solvency II.

    July 30, 2020 WebPage Regulatory News
    News

    MAS Issues Guidance on Dividend Distributions by Banks

    MAS published a statement guidance on dividend distribution by banks.

    July 30, 2020 WebPage Regulatory News
    News

    APRA Updates Guidance on Capital Management for Banks

    APRA updated its capital management guidance for banks, particularly easing restrictions around paying dividends as institutions continue to manage the disruption caused by COVID-19 pandemic.

    July 29, 2020 WebPage Regulatory News
    News

    FSB Report Reviews Macro-Prudential Framework and Tools in Germany

    FSB published a report that reviews the progress on data collection for macro-prudential analysis and the availability and use of macro-prudential tools in Germany.

    July 29, 2020 WebPage Regulatory News
    News

    EBA Urges Firms to Finalize Preparations for End of Brexit Transition

    EBA issued a statement reminding financial institutions that the transition period between EU and UK will expire on December 31, 2020; this will end the possibility for the UK-based financial institutions to offer financial services to EU customers on a cross-border basis via passporting.

    July 29, 2020 WebPage Regulatory News
    News

    SRB on Operational Continuity in Resolution and FMI Contingency Plans

    SRB published guidance on operational continuity in resolution and financial market infrastructure (FMI) contingency plans.

    July 29, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5604