RBNZ consults on Basel III capital adequacy standards

Release date
11 September 2012

The Reserve Bank today confirmed that it will be implementing the core elements of new capital adequacy requirements for banks, in a further step towards implementing new rules under the Basel III regime. It released a consultation paper on the details of the proposed changes, which include increased capital requirements for banks.

The requirements will strengthen the ability of locally incorporated New Zealand banks to absorb losses and are part of the global Basel III reforms aimed at strengthening the international banking system.

The Reserve Bank has also released its response to submissions on earlier consultations which form the basis of the current detailed proposals. A cost-benefit analysis of the Basel III policy is also included.

Reserve Bank Deputy Governor Grant Spencer said New Zealand banks are well placed to meet the new requirements.

"Banks' overall capital levels are strong and generally already exceed the new requirements. While some technical features of bank capital instruments will be fairly new to the capital markets, they are likely to become a feature of bank capital internationally," he said.

Mr Spencer said the changes set out in the draft capital adequacy standard are in line with the Australian Prudential Regulation Authority's (APRA) current plans in this area.

"However, there are some minor differences to APRA's plans, in areas where New Zealand circumstances warrant a different approach," he said.

The new capital adequacy standards under the Basel III framework will go live on 1 January 2013, although a number of transitional measures will apply.

Media contact:
Naomi Mitchell
External Communications Adviser
Ph 04 471 3960, 027 485 9474, naomi.mitchell@rbnz.govt.nz