Consultation on exposure draft for Capital Review Implementation changes
The Reserve Bank is consulting on the details for implementing the final Capital Review decisions announced in December 2019.
Some of the most significant changes in the consultation include implementing the new rules for instruments that make up a bank’s capital, and consulting about the responses the Reserve Bank would take if a bank does not meet capital buffer requirements. The Reserve Bank is not seeking feedback on December 2019 policy decisions.
The Capital Review implementation consultation is being presented through ‘exposure drafts’ of revised documents from the Banking Supervision Handbook, which set out the details of the policy framework and rules that apply to registered banks in New Zealand. These changes are detailed further in the below consultation paper.
The exposure drafts also form part of the roll-out of the replacement for the Banking Supervision Handbook, which is being restructured – and renamed as Banking Prudential Requirements – to re-organise and clarify the existing Handbook documents. This was one of the key areas for improvement identified during a Regulatory Stocktake that the Reserve Bank undertook in 2015. Banks have been presented with drafts of these restructured documents throughout 2016-2019 as part of a working group process.
The creation of the Banking Prudential Requirements is a significant piece of work and the Reserve Bank appreciates the engagement with banks to-date on this process.
The consultation period opened on 17 November 2020 and will run until 31 March 2021. The Reserve Bank will consider all feedback from stakeholders before finalising the Banking Prudential Requirements, from 1 July 2021 onwards.
Consultation documents and explanatory material
As part of this consultation, there are a number of documents that the Reserve Bank is providing to assist stakeholders in providing feedback on, and navigating, the exposure drafts:
- Two page Executive Summary of key issues (PDF 160KB)
- Consultation Paper describing topics and key questions for stakeholders.
- Additional explanatory material for the draft BPR documents, outlining in more detail the changes that have occurred and particular drafting approach in the BPRs.
- Explanatory notes for BPR100, 110, and 120 (PDF 148KB)
- Explanatory notes for BPR140 (PDF 101KB)
- Explanatory notes for BPR001 (PDF 65KB)
- Explanatory notes for BPR130-160 (excluding BPR140) (PDF 345KB)
- Correspondence tables to show mapping of the current Handbook Documents to the new BPR documents (PDF 216KB).
Exposure Drafts of the new Banking Prudential Requirements
The drafts of the Banking Prudential Requirements (BPRs) are presented below:
- BPR100: Capital adequacy (PDF 577KB)
- BPR110: Capital definitions (PDF 643KB)
- BPR120: Capital adequacy process requirements (PDF 630KB)
- BPR130: Credit risk RWAs overview (PDF 458KB)
- BPR131: Standardised credit risk RWAs (PDF 870)
- BPR132: Credit risk mitigation (PDF 701KB)
- BPR133: IRB credit risk RWAs (PDF 847KB)
- BPR134: IRB minimum system requirements (PDF 591KB)
- BPR140: Market risk (PDF 497KB)
- BPR150: Standardised operational risk (PDF 375KB)
- BPR151: AMA operational risk (PDF 471KB)
- BPR160: Insurance, securitisation, and loan transfers (PDF 475KB)
- BPR001: Glossary (PDF 475KB)
There are also existing policy documents that need to be amended to incorporate the changes required to implement Capital Review decisions and the new BPRs. These are marked up and linked below: