Review of the capital adequacy framework for registered banks

Status: Public consultation on proposed reforms to the amount of regulatory capital required of locally incorporated banks closed on 17 May 2019.

Consultation period: 2017- 2019

8 August 2019

The Reserve Bank published a summary of submissions it received on its 8 April 2019 consultation paper seeking feedback on the proposed framework for identifying domestically systemically important banks (D-SIBs).

The summary covers the technical aspects of the approach to identifying D-SIBs and notes that under the proposed framework, the following banks would be classified as D-SIBs: ANZ NZ, BNZ, ASB and Westpac NZ. It contains no new information about the Capital Review.


1 July 2019

The Reserve Bank sought feedback on the amount of regulatory capital required of locally incorporated banks. Some of the key components of the proposals are the types of instruments that qualify as capital, the calculation of risk weighted assets (RWA), and the regulatory requirement levels for capital ratios. Submissions closed on 17 May 2019.

On 1 July 2019 the Reserve Bank published its summary of submissions (PDF 399 KB). The Reserve Bank also published individual submissions where consent was provider by the submitter. 

A response to these submissions and the final decisions on the Capital Review proposals will be published in November 2019.


28 May 2019

As part of the next stage of the Capital Review, the Reserve Bank has commissioned three external experts to independently review the Reserve Bank’s analysis and advice underpinning the Capital Review proposals. Links to the Terms of Reference and biographical information about the three external experts are available below:


20 May 2019

Feedback is being analysed from the consultation on the proposal to increase bank capital. We will soon publish submissions that were sent to us.


8 April 2019

On 8 April 2019 the Reserve Bank published a consultation paper seeking feedback on the proposed framework for identifying domestic systemically important banks (D-SIBs), to facilitate the implementation of the proposed D-SIB capital surcharge.


3 April 2019

The Reserve Bank published additional background information on its proposal to increase the amount of capital that banks must hold. The paper contains more detail about the analytical framework and methodology, and quantitative modelling approach underpinning the Reserve Bank’s proposals, expanding on how the proposals were developed. On 16 April a typographical error was corrected on page 27.


26 February 2019

Reserve Bank Deputy Governor Geoff Bascand presented a speech about proposals to increase bank capital.


22 February 2019

The Reserve Bank has published a simple summary of why it proposes to alter requirements for bank capital, and the impact of its proposals; along with presentation slides used for a media briefing and a bank forum.


25 January 2019

The Reserve Bank has published an updated version of the Capital Review Paper 4: How much capital is enough? (initially published on 14 December 2018), which proposes changes to regulatory capital requirements for locally incorporated banks. The Reserve Bank also extended the submission period for the Capital Review Paper 4 proposals. The amendments to Capital Review Paper 4 reflect:

  • The change to the deadline for submissions;
  • Clarification on the current capital framework’s treatment of Tier 2 capital;
  • Clarification to note that proposed restrictions on distributions apply depending on the level of the prudential capital buffer; and
  • Minor wording changes to enhance clarity or to correct typographical errors.

The Reserve Bank has released background papers relating to the review of capital:


14 December 2018

The Reserve Bank is seeking feedback on proposals to reform the amount of regulatory capital required of locally incorporated banks. The submission period ends on Friday 17 May 2019.


30 November 2018

Notes from an address delivered to Business NZ CEO Forum in Auckland


6 July 2018

The Reserve Bank sought feedback on the calculation of risk weighted assets (‘RWA’). The components of RWA are credit risk, operational risk and market risk. Qualifying banks are permitted to use models to calculate RWA, while remaining banks use the ‘standardised approach’. Submissions closed on 19 March 2018.

On 6 July, the Reserve Bank published its response to submissions.

Submissions for publication

On 6 July 2018 the Reserve Bank published the individual responses received as part of the consultation on risk weighted assets, where consent to do so was provided by submitters.

TSB also provided a response but asked that it not be publicly released.


19 December 2017

The Reserve Bank is seeking feedback on the options for calculating risk weighted assets.

Note: the submission period has now been extended to 19 March 2018.


14 July 2017

The Reserve Bank sought feedback about what type of financial instruments should qualify as bank capital. The consultation was about the nature of financial instruments that are suitable, rather than the amount of capital that banks must hold. Submissions closed on 8 September 2017.

On 19 December, the Reserve Bank published its response to submissions.

Submissions for publication

On 7 November 2017 the Reserve Bank published the individual responses received as part of the consultation, where consent to do so was provided by submitters.

BNZ also provided a response but asked that it not be publically released.


1 May 2017

The Bank published an issues paper on the review. The paper outlines the topics that the Reserve Bank plans to consider as part of the review and the main issues it has identified within each topic.

The issues paper was the first consultation document. The Reserve Bank sought views about whether or not the range of topics and issues in the issues paper was complete, and whether there are certain issues that should be prioritised.

Submissions closed on 9 June 2017.

Submissions for publication

On 19 October 2017 the Reserve Bank published the individual responses received as part of the consultation, where consent to do so was provided by submitters.

BNZ, Kiwibank and Westpac also provided responses, but asked that they not be publically released.

Background

The review of the capital adequacy framework aims to identify the most appropriate capital adequacy framework for locally incorporated registered banks, taking into account experience with the current framework and international developments.