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Proposed RBNZ changes should ensure a level playing field

Proposed RBNZ changes should ensure a level playing field

Kiwibank has advised that any increase to the minimum regulatory level of capital required to be held by banks operating in New Zealand must also ensure both locally-owned and offshore banks continue to compete on a ‘level playing field’.

Kiwibank’s submission was part of the over 170 proposals released today by the Reserve Bank of New Zealand (RBNZ) in regard to its review of the amount of capital banks are required to hold.

In its submission, Kiwibank acknowledged the RBNZ’s desire to further increase the stability of the New Zealand financial system, but it said that any final policy decisions needed to reflect the fact that the New Zealand banking industry was already a stable one.

Kiwibank also noted the significant advantages enjoyed by the Australian banks. This included significantly lower capital requirements and the ability to generate capital through intra-group structures.

It encouraged RBNZ to address these through removing all capital modelling advantages, allowing smaller banks a longer transition period to generate the higher levels of capital required, and allowing market-friendly hybrid instruments to qualify towards the proposed capital levels.

It also encouraged the RBNZ to consider a more tiered structure of capital levels, as current proposals did not sufficiently differentiate them according to how big they were.

“We’ve also suggested a transition period of at least eight years to meet the proposed capital levels, and to best achieve the goal of a stronger New Zealand banking sector,” said Kiwibank Chief Executive Steve Jurkovich.

Mr Jurkovich said Kiwibank acknowledged that with any increase in capital requirements there would be costs for consumers – but exactly how much would depend on multiple factors.

Kiwibank’s submission can be found at https://www.rbnz.govt.nz/

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