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Capital Review dual reporting and other changes to bank disclosure statements

We are consulting on changes to New Zealand-incorporated registered banks’ disclosure statements. These changes are to implement the Capital Review decision on ‘dual reporting’ by modelling banks, and to require some additional disclosure on capital adequacy by all New Zealand-incorporated banks.

Background to consultation

We are consulting on changes to the information that New Zealand-incorporated registered banks must publish in their six-monthly disclosure statements.

The main changes are to introduce ‘dual reporting’, which was one element of the Capital Review final policy decisions published in December 2019.

See Review of the capital adequacy framework registered banks

Our capital adequacy framework allows for some banks to be accredited to use their own internal models to calculate some of the risk-weighted assets (RWAs) for credit risk: we refer to such banks as modelling banks. Banks otherwise have to calculate their RWAs using the standardised approach, with risk-weights prescribed by us.

Dual reporting refers to additional information that a modelling bank would include in its disclosure statements. The additional information would be the bank’s RWAs and resulting capital ratios recalculated as if the bank was subject to the standardised approach. The main objective of dual reporting is to show how the use of internal models affects a bank’s RWA outcomes compared to using the standardised approach.

We are also proposing some other additions to modelling banks’ disclosure requirements, to provide greater clarity around changes to their capital ratio calculations that came into force on 1 January 2022. 

In addition, we are consulting on some other minor additions to disclosure statements for all New Zealand-incorporated banks, whether or not they are modelling banks. These additions are to provide more detail in the disclosure of RWAs for counterparty credit risk: this refers to a bank’s risk of loss from the failure of a counterparty to a derivative contract.

We are proposing that these changes would take effect for disclosure statements with reporting dates of 30 September 2022 or later.

How to make a submission

We invite submissions on this Consultation Paper by 3 May 2022.

Please note the disclosure on the publication of submissions detailed in the consultation document.

Address submissions and enquiries to [email protected] with subject line: Consultation on dual reporting and other bank disclosure changes.

Requirements currently in force

The current version of the required disclosure of information on capital adequacy can be seen in our ‘working copy’ of the disclosure Order in Council for New Zealand-incorporated registered banks, available from the following page:

Disclosure Requirements