Featured Product

    RBNZ Releases Materials and Response to Submissions on Capital Review

    December 19, 2019

    RBNZ released background materials and papers on the final decisions on the comprehensive review of the capital adequacy framework for locally incorporated registered banks in New Zealand, along with its response to submissions on the fourth and final consultation paper on the capital review. To account for the transitional impact, the first changes resulting from the capital review will come into effect on July 01 2020 and the last on July 01, 2027. The seven-year transition period allows a longer timeframe to meet new capital requirements. Also, RBNZ has decided to implement the change in internal ratings-based scalar from October 01, 2020 and output floor from January 01, 2021. This ensures that the playing field between the internal and standardized approach banks is leveled sooner rather than later.

    The final decisions in the capital review included a range of changes to the fourth paper (December 2018) proposals. Many of these changes reflect feedback received during the submission process and points raised in stakeholder meetings with a diverse range of groups. The final decisions include more flexibility for banks on the use of specific capital instruments, a more cost-effective mix of funding options for banks, more transparency in capital reporting, and a lesser increase in capital for the smaller banks consistent with their more limited impact on society should they fail. All of the banks identified as domestic systemically important banks or D-SIBs (ANZ, ASB, BNZ, and WNZL) agreed with the proposed D-SIB buffer of 1%, noting that this calibration aligns with the approach of APRA. However, RBNZ determined that a more appropriate D-SIB buffer for the New Zealand context would be 2%. This is on the basis that D-SIBs in New Zealand are relatively more systemic than they would be overseas, largely due to the high level of concentration in the banking sector.

    Furthermore, any legislative changes to the crisis management regime in New Zealand are not likely to come into effect for several years. RBNZ has not yet determined whether establishing a bail-in framework would be desirable in the New Zealand context, even if provided with the legislative authority to do so. If RBNZ were to establish a bail-in framework, it would likely not become effective for several years after the legislative authority is provided. If a bail-in framework were to exist, it should not be assumed that it would be appropriate to use it in all resolution scenarios. If a bail-in framework were to exist, its effectiveness could not be evaluated until after it is executed (bail-in frameworks remain untested internationally).

    As part of the next steps, RBNZ will consult on Exposure Drafts of the capital chapters in the Banking Supervision Handbook, to give effect to the 2019 reforms. It is envisaged that the Exposure Drafts will be ready for consultation by April 01, 2020. An indicative date for the end of the consultation on the Exposure Drafts is June 01, 2020, with the revised chapters coming into effect on July 01, 2020. The transition period will begin on July 01, 2020. An indicative transition timeline is given in Appendix 2. RBNZ will consult on the details of the Escalating Supervisory Response policy and operationalizing the countercyclical capital buffer, or CCyB, in 2020.

     

    Related Links

    Keywords: Asia Pacific, New Zealand, Banking, Capital Adequacy Framework, Capital Review, Basel III, Regulatory Capital, Systemic Risk, Resolution Framework, RBNZ

    Featured Experts
    Related Articles
    News

    Regulators Fine Goldman Sachs for Risk Management Failures

    FCA and PRA in the UK, FED in the US, and the authorities in Singapore have fined Goldman Sachs for risk management failures in connection with the 1Malaysia Development Berhad (1MDB).

    October 23, 2020 WebPage Regulatory News
    News

    Canada Hosts International Conference of Banking Supervisors

    BCBS announced that OSFI and the Bank of Canada hosted the 21st International Conference of Banking Supervisors (ICBS) virtually on October 19-22, 2020.

    October 22, 2020 WebPage Regulatory News
    News

    FCA Proposes More Measures to Help Insurance Customers Amid Crisis

    FCA proposed guidance on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of COVID-19, after October 31, 2020.

    October 21, 2020 WebPage Regulatory News
    News

    EBA Issues Opinion to Address Risk Stemming from Legacy Instruments

    EBA issued an opinion on prudential treatment of the legacy instruments as the grandfathering period nears an end on December 31, 2021.

    October 21, 2020 WebPage Regulatory News
    News

    ESRB Publishes Non-Bank Financial Intermediation Risk Monitor for 2020

    ESRB published the fifth issue of the EU Non-bank Financial Intermediation Risk Monitor 2020 (NBFI Monitor).

    October 21, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Policy Statement Amending Benchmarks Regulation

    HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.

    October 21, 2020 WebPage Regulatory News
    News

    APRA Initiates Action Against a Bank for Liquidity Compliance Breach

    APRA announced that it has increased the minimum liquidity requirement of Bendigo and Adelaide Bank for failing to comply with the prudential standard on liquidity.

    October 21, 2020 WebPage Regulatory News
    News

    PRA Consults on Implementation of Certain Provisions of CRD5 and CRR2

    PRA published the consultation paper CP17/20 to propose changes to certain rules, supervisory statements, and statements of policy to implement elements of the Capital Requirements Directive (CRD5).

    October 20, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Rule to Reduce Impact of Large Bank Failures

    US Agencies adopted a final rule that applies to advanced approaches banking organizations and aims to reduce interconnectedness in the financial system as well as to reduce contagion risks associated with the failure of a global systemically important bank (G-SIB).

    October 20, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Rule on Net Stable Funding Ratio Requirements

    US Agencies (FDIC, FED, and OCC) adopted a final rule that implements the net stable funding ratio (NSFR) for certain large banking organizations.

    October 20, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6004