RBNZ Consults on Implementation of Capital Review Changes
RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019. As part of these decisions, RBNZ had planned to gradually raise bank capital requirements starting in 2020. However, increases in the required level of capital will now commence from July 01, 2022, to allow banks continued headroom to respond to the shock of COVID-19 crisis, while other Capital Review decisions are due to be implemented from July 01, 2021 onward. The comment period on this consultation will end on March 31, 2021. RBNZ will consider all feedback from stakeholders before finalizing the Banking Prudential Requirements, from July 01, 2021 onward.
RBNZ is consulting on the detailed rules, including the new rules for instruments that make up a bank’s capital and the framework setting out responses RBNZ would take if a bank does not meet capital buffer requirements. The Capital Review implementation consultation is being presented through exposure drafts of revised documents from the Banking Supervision Handbook, which set out the details of the policy framework and rules that apply to registered banks in New Zealand. These changes have been detailed further in the consultation paper titled "Changes to the Banking Supervision Handbook: Exposure Draft for Capital Review Changes." The exposure drafts also form part of the roll-out of the replacement for the Banking Supervision Handbook, which is being restructured—and renamed as Banking Prudential Requirements—to re-organize and clarify the existing Handbook documents. This was one of the key areas for improvement identified during a Regulatory Stocktake that the RBNZ undertook in 2015.
The full, restructured, and renamed Banking Prudential Requirements covering capital adequacy will be in place from July 01, 2021. RBNZ plans to publish the full revamped Banking Prudential Requirements by the end of 2021. As part of this consultation, RBNZ has published drafts of the planned Banking Prudential Requirements (BPRs), which are structured as follows:
- BPR100: Capital adequacy
- BPR110: Capital definitions
- BPR120: Capital adequacy process requirements
- BPR130: Credit risk-weighted assets (RWAs) overview
- BPR131: Standardized credit risk RWAs
- BPR132: Credit risk mitigation
- BPR133: Internal Ratings-Based credit risk RWAs
- BPR134: IRB minimum system requirements
- BPR140: Market risk
- BPR150 and 151: Standardized and Advanced Measurement Approach (AMA) operational risk
- BPR160: Insurance, securitization, and loan transfers
- BPR001: Glossary
The remaining of the Banking Prudential Requirements will be rolled out in due course. RBNZ notes that some additional work that will be undertaken in the second half of 2021 to implement dual (standardized and IRB) reporting for IRB banks from the first quarter of 2022. Another key consultation point is the draft text to implement the 2019 Capital Review decisions. RBNZ is also consulting on some new policy decisions that follow from the outcomes of the Capital Review. These decisions are:
- Changes to distribution restrictions, including separate sets of restrictions for distributions on Common Equity Tier 1 (CET1) and Additional Tier 1 (AT1) capital
- The Capital Buffer Response Framework (CBRF), which outlines the possible supervisory actions that RBNZ may take as a bank enters into its prudential capital buffer
- A proposal to include template terms sheets for AT1 and Tier 2 capital instruments, which include the prudential requirements for instruments to qualify as capital, as well as market standard requirements (These can be used by banks to issue RBNZ-compliant AT1 and Tier 2 capital instruments.)
- The "notification" process, proposed to replace the current non-objection process, which banks must follow to issue RBNZ-compliant AT1 and Tier 2 capital instruments
Related Links
- News Release
- Exposure Draft of Revised Handbook
- Executive Summary of Consultation (PDF)
- Consultation Paper (PDF)
- Restructure of Banking Supervision Handbook
- Capital Review Go-To-Guide (PDF)
- Letter to Banks, October 20, 2020 (PDF)
Comment Due Date: March 31, 2021
Keywords: Asia Pacific, New Zealand, Banking, Basel, Reporting, Regulatory Capital, Credit Risk, Market Risk, Operational Risk, RBNZ
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
HKMA Consults on Capital Rules for Bank Equity Investments in FundsRelated Articles
EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
IOSCO Welcomes Work on Sustainability-Related Corporate Reporting
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
BoE Allows One-Day Delay in Statistical Data Submissions by Banks
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
ACPR Amends Reporting Module Timelines Under EBA Framework 3.2
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies
The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)
APRA to Modernize Prudential Architecture, Reduces Liquidity Facility
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.
