Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Reserve Bank sticks to its guns on timing of new bank rules

Reserve Bank sticks to its guns on timing of new bank capital requirements

By Pattrick Smellie

Sept. 11 (BusinessDesk) - Australian-owned banks operating in New Zealand are being required to meet new global capital adequacy rules two years ahead of their trans-Tasman parents.

The Reserve Bank of New Zealand rejected submissions from banks that they should have until January 2016 to get ready for new capital adequacy rules that are being imposed in the wake of the global financial crisis.

The so-called Basel III framework, named for the Bank of International Settlements in Basel, Switzerland, is being imposed early in New Zealand, from January 2014.

The RBNZ also held firm on its intention to move to a "counter-cyclical buffer" approach to capital adequacy from 2014, despite several banks fearing they could not prepare in time for a new regime requiring them to ramp capital up and down in response to central bank judgements about the emergence of credit booms or busts.

The counter-cyclical buffer is being proposed as a new, slow-acting instrument of monetary policy, which will require a 12 month warning to allow banks to reorder their balance sheets to meet the buffer requirements.

The central bank rejected pleas for earlier warning and for the counter-cyclical buffer to be set no higher than 2.5 percent of risk-weighted assets.

"A longer notice period runs the risk that the countercyclical buffer is built up too late," the bank said in a summary of its response to submissions on the Basel III rules, which were communicated to banks in May. "In the context of a credit boom it is likely that capital can be raised reasonably easily and even if it could not the bank would simply face restrictions on distributions."

"Dialogue with banks and public signalling of our unease about credit developments" would come ahead of a formal trigger announcement.

On the 2.5 percent upper limit for the buffer, the RBNZ said "no formal limit on the maximum size of the buffer is appropriate for New Zealand" because of the lack of experience calibrating of the new instrument, and "retaining an open-ended maximum may be useful in conditioning bank incentives against excessive credit growth."

It "acknowledges that further work is needed on the countercyclical buffer framework in relation to financial indicators as well as governance and accountability arrangements for the operation of the buffer."

"However we consider this work can be undertaken in sufficient time to allow the implementation of the countercyclical buffer in 2014."

Further announcements are due in coming weeks on the RBNZ's approach to the controversial issue of "open bank resolution" - a proposal to require depositors and bond-holders to take a financial "hair-cut" in the event of a bank failure.

(BusinessDesk)

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 


NIWA: Tonga Eruption Discoveries Defy Expectations
New findings from the record-breaking Tongan volcanic eruption are “surprising and unexpected”, say scientists from New Zealand’s National Institute for Water and Atmospheric Research (NIWA)... More>>


Commerce Commission: Appeals Record $2.25m Fine In Vodafone FibreX Case

The Commerce Commission has filed an appeal in the High Court against a record $2.25 million fine imposed on Vodafone NZ Limited (Vodafone) for its offending under the Fair Trading Act during its FibreX advertising campaign. While the sentence imposed in the Auckland District Court on April 14 was the largest-ever fine under the Fair Trading Act, the Commission will argue that it is manifestly inadequate... More>>



All District Health Boards: Historic Pay Equity Settlement

An historic agreement has been ratified that addresses a long-standing undervaluation of a workforce that is critical to the smooth running of our hospitals and the delivery of healthcare... More>>




Finder: RBNZ Survey: 64% Of Experts Say Rising Inflation Will Push More Kiwis Into Debt

Soaring inflation and cost of living pressures will see many households pushed to the financial limit, according to experts... More>>



Barfoot & Thompson: Rents Up By Around 3% In Most Areas

The average weekly rent paid for homes in most areas of Auckland has risen by around 3 percent year-on-year. The figures for end March from more than 16,000 properties... More>>


DoC: Smeagol The ‘Gravel Maggot’ Leaves Its Rare Mark On The Remote West Coast
An extremely rare species of sea slug or ‘gravel maggot’ has been detected for the first time on a remote beach in South Westland... More>>