It follows the three independent assessments of its Capital Review
The Reserve Bank of New Zealand (RBNZ) has announced that it will revisit all its bank capital proposals before making its final decision in December 2019.
Geoff Bascand, deputy governor at RBNZ, said the move follows the three independent assessments of its Capital Review – all of which agreed that the proposals are fair and do not demand levels of capital which are “clearly higher than they should be.”
"We are revisiting all of our in-principle decisions," Bascand said.
"What we've got here is a lot of support for the direction of travel. We are going to increase capital requirements – we've made no bones about that, but the amount of capital, what form it takes and how long the transition period should be will all be reviewed before the final decisions are made.”
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RBNZ has proposed increasing the minimum amount of tier 1 common equity capital the NZ banks have to hold – from 8.5% to 16% for the big four banks and to only 15% for the smaller banks.
Speaking about the three independent reviews, Bascand said: “[We] are very pleased that the reports endorsed the overall methodology and quality of the work that we undertook. It was very reassuring they found that was sound and of good quality.”
"They gave us a few areas to look at and some technical areas to review more thoroughly but the big message was that they were comfortable" with RBNZ's proposals.
He added that the three reviewers – James Cummings of Macquarie University, Ross Levine from University of California in Berkeley, and David Miles of Imperial College – had “free rein” to look at whatever they wished and talk to whoever they wanted.
"Obviously, we gave them a terms of reference to look at the overall approach we took, but they were able to look beyond that as they chose, including speaking to people within the major banks and to the authors of the independent review by Sapere that the New Zealand Bankers' Association commissioned,” he said.
"They were then free to write their own reports on what they regarded as important and given normal academic freedom. It was their reputations on the line from the quality of their reviews."
