Reserve Bank launches Capital Review consultation

by Roxanne Libatique18 Nov 2020

The Reserve Bank of New Zealand (RBNZ) is seeking industry feedback on the details for implementing the final Capital Review decisions announced last December.

In December 2019, the RBNZ decided to gradually raise bank capital requirements to make the banking system safer. It intended to apply the changes in 2020 but delayed the process in response to the impacts of the COVID-19 pandemic.

“The Reserve Bank has adjusted implementation plans and is today publishing consultation material on the detailed rules to provide certainty and clarity to industry and other stakeholders on the future capital framework. This is so that banks can plan their future funding and lending strategies and continue to support the economy,” said Reserve Bank deputy governor Geoff Bascand.

The RBNZ clarified that it is not seeking feedback on the December 2019 policy decisions. The scope for the latest consultation is limited to the way the central bank proposes to implement the decisions.

“We are consulting on the detailed rules, including the new rules for instruments that make up a bank’s capital, and the framework setting out responses the Reserve Bank would take if a bank does not meet capital buffer requirements,” Bascand said.

The RBNZ presents the Capital Review implementation consultation through “exposure drafts” of revised documents from the Banking Supervision Handbook – with the changes detailed in the recently published consultation paper, “Changes to the Banking Supervision Handbook: Exposure Draft for Capital Review Changes.”

The consultation period will run until March 31, 2021. The RBNZ will consider all feedback from stakeholders before finalising the Banking Prudential Requirements from July 01, 2021 onwards.

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