The Bank Financial Strength Dashboard - an interactive disclosure tool for New Zealand
On 29 May, the Reserve Bank launched the Bank Financial Strength Dashboard (the ‘Dashboard’), an innovative online tool for sharing prudential and financial information on New Zealand incorporated banks.1 It sits alongside disclosure statements as a source of information for the public and market to better understand and compare banks’ businesses and risks. The Dashboard is updated quarterly and is based on information that banks already provide to the Reserve Bank, reducing the cost of the initiative for banks and the Reserve Bank.
Go to the Bank Financial Strength Dashboard
Diagram A1 The Bank Financial Strength Dashboard
The Dashboard uses an original and world-leading design to make prudential information easily accessible and comparable for all interested parties, including professional investors, business journalists, financial analysts, rating agencies and the general public. It aims to strengthen the market discipline and self-discipline of banks – two of the three pillars of the Reserve Bank’s regulatory and supervisory framework.2 Market discipline will be enhanced by improving the ability of the public and market participants to understand and act on information about banks’ financial strength and risk profile. Self-discipline will be improved by increasing the incentives for banks to act appropriately and by making it easier for banks to benchmark themselves against peers.
The Dashboard has more than 100 metrics…
The Dashboard contains more than 100 individual metrics on the financial strength of banks that cover seven subject areas (table A1) and are presented in a layered format. A ‘key metrics summary’ page presents seven key metrics (one for each subject area) in a chart format and is intended to provide users with quick insights. These charts are interactive and contain simple descriptions of the metrics.
The Dashboard also includes a page for each bank, which shows their metrics in one place. This includes details of any recent data revisions, and supplementary commentary that is provided directly by banks. Users can also download the underlying data for each metric.
…that can be used to inform financial decisions.
The metrics included in the Dashboard are intended to provide relevant information to help users make financial decisions. Deciding where to invest money is an important financial decision that requires a careful assessment of the risks and returns of various options. The Dashboard’s user-friendly design and interactive features allow users to make meaningful side-by-side comparisons of banks and to better understand their financial strength. However, the Dashboard does not present the full picture and investors should always obtain professional advice when making important financial decisions.
Feedback on the Dashboard is encouraged.
The Reserve Bank’s immediate focus is on ensuring the current version of the Dashboard tool runs smoothly and is well understood by users. The Reserve Bank plans to run a sustained education and awareness campaign to support the launch of the Dashboard. Feedback from users is encouraged. Future developments will be strongly influenced by users’ needs. A wider review of the Dashboard is expected in due course.
Table A1 Dashboard metrics
|Subject area||Key metric||Number of components of key metrics|
|Credit rating||Credit rating||3|
|Capital adequacy||Total capital ratio||27|
|Asset quality||Non-performing loans ratio||44|
|Profitability||Return on assets||14|
|Balance sheet||Total assets||14|
|Liquidity||Core funding ratio||3|
|Credit concentration||Top five non-bank exposures||4|
1 Bank Financial Strength Dashboard
2 For an overview of the three-pillar approach, see Hunt, C (2016) ‘A short history of prudential regulation and supervision at the Reserve Bank’ Reserve Bank of New Zealand Bulletin, 79(14).