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Capital Review

The Capital Review was a 5-year process to review the capital adequacy rules for locally incorporated, registered banks in New Zealand. Here is an overview of the Capital Review and links to all the related consultations, decision-making papers and external expert review papers.

Status: Key Capital Review changes were brought into effect on 1 October 2021 via the new Banking Prudential Requirements (BPRs). Further changes will be gradually phased in. Consultation on Capital Review disclosure changes is currently open.

Consultation period: 2017- 2022

7 December 2022: A new capital instrument for mutual banks

We are seeking feedback on the specific design features of a new capital instrument that can be issued by mutual banks to help meet their bank capital requirements.

The consultation is open from December 2022 to 31 March 2023.

Find out more about the consultation and make a submission

Background information

In March 2022 we published a consultation paper looking for feedback on 2 policy options for a mutual capital instrument. These options were intended to provide mutual banks with an instrument which could qualify as Common Equity Tier 1 (CET1) capital.

We have since made decisions on the design of a new mutual capital instrument. The Response to submissions outlines the rationale for our decisions and seeks feedback on the design of the new mutual capital instrument, which have been specified in proposed amendments to the following Banking Prudential Requirements (BPR) documents.

The links below provide all of the supporting documents for the decision, including the Regulatory Impact Assessment and Response to submissions.

We are also publishing the submissions that we received.

Finalised BPR documents will be published once we have considered any stakeholder feedback. At this stage we intend that the revised BPRs would take effect from 1 July 2023.

Previous updates by year

Read about our previous consultations on the Capital Review.

29 September 2022

Some technical amendments to risk weights are being considered. See here for more information.

Risk weights consultation paper

16 March 2022

Capital instruments for mutual banks are being considered. See here for more information:

Capital Instruments for Mutual Banks

22 February 2022

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. Dual reporting refers to additional information that a bank would have to provide if it is accredited to use its own internal models to calculate risk-weighted assets (RWAs). This would show the bank’s RWAs recalculated using the standardised approach, alongside the modelled RWAs that the bank calculates to comply with minimum capital ratios.

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 accredited to use their own risk-weighting models.

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

The consultation paper can be found here:

Capital Review: dual reporting and other changes to bank disclosure statements

Updated Capital Review implementation timeline (PDF 523KB)

17 June 2021

We published the final requirements for bank capital adequacy, outlined in new Banking Prudential Requirements (BPR) documents. The new rules implement the decisions made during the Capital Review and a comprehensive, five-year project, to restructure how the capital adequacy rules are written and presented.

The new framework increases the amount of capital banks must have, which will make the banking system safer for all New Zealanders. Increases in capital will be phased in over a seven-year period, starting from July next year. Other changes will be phased in from 1 October 2021 onwards.

Links to the new BPR documents, as well as a number of documents that describe how the framework will operate are available below. Links to the submissions the Reserve Bank received, and a Response to Submissions are also available below:

5 May 2021

The Exposure Draft consultation for the Capital Review implementation closed on 31 March 2021. We received feedback across a range of topics and intend to publish the final Banking Prudential Requirements (BPRs) documents, which implement the Capital Review, in early June.

Some of the feedback we received in the submissions asked for changes in the timetable for implementing the Capital Review. The following decisions were communicated in the May Financial Stability Report:

  • The formal start date for implementing the new BPRs will be extended from 1 July 2021 to 1 October 2021. This will provide banks a longer period after the final documents are published to adjust systems and processes for the new framework
  • The Reserve Bank intends to recognise Tier 2 instruments issued in accordance with the new BPRs after the BPRs are published, but before the 1 October date. We will provide details about how this will work when the BPRs are published in June.
  • The start date for the derecognition of existing non-compliant capital instruments will be extended to 1 January 2022. This is an extension of six months and helps provide more time for banks to prepare for issuing new instruments.
  • All other implementation dates will remain the same as previously communicated, including the 1 January 2022 introduction of an output floor set at 85% of the outcome under the standardised approach for banks accredited to use internal models (IRB banks) for calculating risk weighted assets.

All other responses to the feedback will be published with final BPRs in June. We will be writing to banks to inform them of these decisions and a copy of the letter will be available here:

17 November 2020

The Reserve Bank opened consultation 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.

More information and consultation material is available on the Consultation on exposure draft for Capital Review page.

See consultation on exposure draft for Capital Review

11 November 2020

The Reserve Bank announced a further delay in the start of increases in bank capital until 2022 to allow banks continued headroom to respond to the effects of the COVID-19 pandemic and to support the economic recovery. The changes mean the increase in the Prudential Capital Buffer will not begin until July 2022. The Reserve Bank will reconfirm this timing near the end of 2021, and will consider making further amendments to the timing if the conditions warrant it. Other aspects of the capital reforms will proceed from 1 July 2021, including the new rules around capital instruments.

Full details are available on the the news release page.

News release: Further regulatory steps to promote cashflow, confidence, and stability

16 March 2020

In response to the impacts of COVID-19 and to support credit availability, the Bank has decided to delay the start date of increased capital requirements for banks by 12 months - to 1 July 2021. Should conditions warrant it next year, the Reserve Bank will consider whether further delays are necessary.

Full details are available on the news release page.

News release: Financial system sound, and Reserve Bank providing additional support

19 December 2019

The Reserve Bank of New Zealand has released background materials along with its response to submissions on the fourth and final consultation paper, 'How much capital is enough?' . The release of background papers includes information that was considered during the final stages of the Capital Review. It includes advice considered by the Reserve Bank's Financial Stability Committee during the decision-making stages of the Review, other relevant analysis carried out by the Reserve Bank, and reports to the Minister of Finance.

5 December 2019

The Reserve Bank released its final decisions following its comprehensive review of its capital framework for banks, known as the Capital Review.

The key decisions, which start to take effect from 1 July 2020, include banks’ total capital increasing from a minimum of 10.5% to 18% for the four large banks and 16% for the remaining smaller banks.

1 October 2019

We published three reports by external experts, whom we commissioned to independently review our analysis and advice underpinning the Capital Review proposals. We also published a short summary of these reports.

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.

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 were published in December 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.


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.