Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search


RBNZ warned the govt of "intensive lobbying" by banks

Cabinet memos: RBNZ warned the govt of "intensive lobbying" by banks

By Jenny Ruth

March 12 (BusinessDesk) - The Reserve Bank realised the banks were not expecting higher capital requirements of the scale the central bank has decided to impose and it warned the government to expect “intensive lobbying” from the big four banks.

In a memo dated Dec. 6 to Prime Minister Jacinda Ardern, Finance Minister Grant Robertson and Commerce and Consumer Affairs Minister Kris Faafoi, the Reserve Bank said the banks did know it was likely to require them to hold higher levels of capital.

“However, we do not believe the banks are expecting increases of the scale we are proposing,” says the memo, which was released along with other similar memos after a request under the Official Information Act.

“Our advice is to anticipate intensive lobbying from the large banks once they become aware of what we are proposing in the consultation paper due to be released in mid-December.”

On Dec. 14, the Reserve Bank announced proposals to double the minimum amount of tier 1 capital that the four major banks have to hold from 8.5 percent to 16 percent of risk-weighted assets and to lift total minimum capital from 10.5 percent to 18 percent.

The central bank is also proposing to reduce the advantage the four major banks have enjoyed since 2008 over smaller banks because they are allowed to use their own internal models for calculating their capital requirements rather than the standardised model the other banks have to use.

The Reserve Bank plans to limit that advantage to no less than 90 percent of the capital required using standardised models.

Figures the central bank released in February showed New Zealand’s largest bank, ANZ Bank, currently has to hold just over half the amount of capital that Kiwibank is forced to hold to back every $100 of mortgage lending.

That gives the Australian-owned bank a huge cost advantage over its smaller government-owned rival.

“The large banks – effectively the four Australian-owned banks – operate under a capital calculation framework that currently gives them an unjustifiably large capital advantage over the other banks in the system that are subject to our capital requirements,” the memo says.

International regulators are also grappling with the uneven playfield such rules have created, it says.

“The Reserve Bank is proposing to follow the international approach but is proposing to go further in closing the gap than other countries – including Australia – and indeed further than the international standards suggest.”

The Australian Prudential Regulation Authority is also requiring Australian banks – and Australia’s big four banks own New Zealand’s big four banks – to lift their total capital to 19.5 percent from 11.5 percent currently, but it is leaving its tier 1 capital requirement at 6 percent, where it already sits.

Another major difference is that New Zealand’s Reserve Bank will limit tier 1 capital to equity only, no longer accepting quasi-equity or hybrid securities that normally function as debt instruments but which can be converted into equity if required.

APRA will still allow quasi-equity to count towards tier 1 capital and it expects most of the additional capital will be satisfied by such instruments which cost about a fifth of the cost of equity.

An earlier memo to Robertson dated June 26, 2018, the Reserve Bank explained in detail how the internal models give the major banks an unfair competitive advantage and also noted “the sector as a whole has argued that it is well-capitalised by international standards.”

Another memo to Robertson dated Feb. 12, says “media commentary has been both sceptical and supportive” and that “we are getting more submissions from the general public than we would normally expect for a consultation such as this, and most have been supportive.”


© Scoop Media

Parliament Headlines | Politics Headlines | Regional Headlines

New Reports: Flood Risk From Rain And Sea Under Climate Change

One report looks at what would happen when rivers are flooded by heavy rain and storms, while the other examines flooding exposure in coastal and harbour areas and how that might change with sea-level rise.

Their findings show that across the country almost 700,000 people and 411,516 buildings worth $135 billion are presently exposed to river flooding in the event of extreme weather events...

There is near certainty that the sea will rise 20-30 cm by 2040. By the end of the century, depending on whether global greenhouse gas emissions are reduced, it could rise by between 0.5 to 1.1 m, which could add an additional 116,000 people exposed to extreme coastal storm flooding. More>>



Gordon Campbell: On The Commerce Commission Fuel Report

The interim Commerce Commission report on the fuel industry will do nothing to endear the major oil companies to the New Zealand public... More>>


Emergency Govt Bill: Overriding Local Licensing For The Rugby

“It’s pretty clear some clubs are having difficulty persuading their district licensing committees to grant a special licence to extend their hours for this obviously special event, and so it makes sense for Parliament to allow clubs to meet a community desire." More>>


Leaving Contract Early: KiwiBuild Programme Losing Another Top Boss

Ms O'Sullivan began a six-month contract as head of KiwiBuild Commercial in February, but the Housing Ministry has confirmed she has resigned and will depart a month early to take up a new job. More>>


Proposed National Policy Statement: Helping Our Cities Grow Up And Out

“We need a new approach to planning that allows our cities to grow up, especially in city centres and around transport connections. We also have to allow cities to expand in a way that protects our special heritage areas, the natural environment and highly productive land." More>>


Ombudsman's Report: Ngāpuhi Elder 'Shocked' By Conditions At Ngawha Prison

A prominent Ngāpuhi elder is shocked to find inmates at Ngawha Prison are denied water and forced to relieve themselves in the exercise yard... Chief Ombudsman Peter Boshier has released a report highly critical of conditions at the Northland prison. More>>


Promises: Independent Election Policy Costing Unit A Step Closer

The creation of an entity to provide political parties with independent and non-partisan policy costings is a step closer today, according to Finance Minister Grant Robertson and Associate Finance Minister James Shaw. More>>


School's In: Primary And Intermediate Principals Accept New Offer

Primary and intermediate school principals have voted to accept a new settlement from the Ministry of Education, which includes entrenched pay parity with secondary principals. More>>


IPCA On 'Rawshark' Investigation: Multiple Police Failings In Hager Searches Confirmed

The Independent Police Conduct Authority has found that the Police's unlawful search of Nicky Hager's property in October 2014 resulted from an unwitting neglect of duty and did not amount to misconduct by any individual officer... More>>


Broadcasting Standards: Decisions On Coverage Of Mosque Attacks

The Authority upheld one of these complaints, finding that the use of extensive excerpts from the alleged attacker’s livestream video on Sky News New Zealand had the potential to cause significant distress to audiences in New Zealand, and particularly to the family and friends of victims, and the wider Muslim community. More>>




InfoPages News Channels