Bank capital review background papers released, consultation extended
The Reserve Bank has released background papers relating to its ongoing review of the minimum amount of capital that banks must hold.
The Reserve Bank is currently consulting on a proposal to raise the amount of capital that banks must hold. This change would make bank failures less likely and ensure that bank shareholders have a meaningful stake in their bank, so that they absorb a greater share of losses if their bank fails.
The background papers relate to the consultation currently underway, and the wider review of bank capital rules which has been underway since 2016. The papers were prepared for internal discussions by Reserve Bank staff in the development of the proposals. They include the extensive research, modelling and analysis that has gone into the review. Additional technical papers on some specific topics, such as the cost of capital, will also be released as the review continues.
Deputy Governor and General Manager of Financial Stability Geoff Bascand says the consultation is significant as the proposal could see banks’ capital levels increase materially.
“While we’ve published our proposed views in the consultation document, these are not final, and we want to ensure all interested parties have time to adequately consider the proposals and provide feedback,” Mr Bascand said.
The Reserve Bank has extended the timeframe for consultation by just over a month, in response to feedback from stakeholders.
The extended deadline for feedback on the proposals is 3 May 2019, and the Reserve Bank expects to publish final decisions in the third quarter of 2019.
The Reserve Bank is proposing a five-year transition period for banks to meet any new requirements that it introduces.
- Background papers
- Consultation paper: How much capital is enough? (PDF 1.17MB)
- Non-technical summary: How much capital is enough? (PDF 1.45MB)
- Video: What is capital adequacy?
- Video: Governor Adrian Orr describes importance of bank capital