Credit ratings
Background
Sections 157I to 157K of the Reserve Bank of New Zealand Act 1989 (the Act) require deposit takers, otherwise known as non-bank deposit takers (NBDTs), to have a credit rating from an approved rating agency, and allow the Reserve Bank to make regulations specifying the type of credit rating that is required.
Credit ratings provide a simple way to inform depositors of an NBDT’s risk profile, and they facilitate comparison of risks across the sector. The requirement is intended to strengthen the incentives for NBDTs to develop and maintain sound governance and risk management practices.
A simple factsheet (PDF 110KB) on credit ratings has been developed to help investors understand credit ratings and how to use them.
Credit Rating Requirements
The Deposit Takers (Credit Ratings) Regulations 2009 came into force on 1 March 2010. The regulations require NBDTs to have a local currency (New Zealand dollar), long-term, issuer rating, given by an approved rating agency. After 1 December 2010, these requirements will continue in force by virtue of the Deposit Takers (Credit Ratings, Capital Ratios, and Related Party Exposures) Regulations 2010.
The Reserve Bank has approved the following rating agencies for the purposes of Part 5D of the Act (Part 5D deals with prudential regulation and supervision of deposit takers):
- Standard and Poor’s Ratings Services;
- Moody’s Investors Service; and
- Fitch Ratings.
View a list of NBDTs who have obtained credit ratings under Part 5D of the Act.
Consultation
On 17 February 2009, the Reserve Bank released a consultation paper (PDF 59KB) proposing the type of credit rating that NBDTs would be required to hold.
A consultation paper on the policy for approving credit rating agencies for the NBDT regime was issued in September 2008.
Guidelines for approval of credit rating agencies
On 15 December 2008, the Reserve Bank released guidelines for credit rating agencies (PDF 48KB) applying to be approved under Part 5D of the Act, and details of the process for rating agency applications.
