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

 

Chapman Tripp pleads for more time on bank capital proposals

By Jenny Ruth

July 31 (BusinessDesk) - Law firm Chapman Tripp is urging the Reserve Bank to delay its final decision on increasing the minimum amounts of bank capital because of its critical importance to both the banks themselves and to the wider economy.

“It is therefore vital that sufficient time and resources are devoted to getting the right outcome and that decisions are made only after all the relevant issues have been thoroughly analysed,” Chapman Tripp says in its submission on the capital proposals.

“However, we sense from the tone of the consultation paper and the timeframes for responses that the Reserve Bank is focused on concluding this process quickly,” it says.

“We question the Reserve Bank’s apparent urgency,” given that the banks have consistently passed RBNZ’s stress tests and that neither the credit rating agencies nor the IMF have raised issues on New Zealand banks’ ability to weather economic downturns.

RBNZ has proposed lifting the minimum amount of tier 1 common equity capital required by the four Australian-owned banks, which account for about 88 percent of New Zealand’s banking system, from 8.5 percent to 16 percent and to 15 percent for the smaller banks.

When it released the 161 submissions earlier this month, RBNZ said it will publish its response and final decisions in November versus the September quarter it had previously indicated. The implementation of any new rules will start from April next year with a transition period of “a number of years.” That’s a relaxation from its previous suggestion of a five-year phase in period.

Chapman Tripp criticises RBNZ’s intention to conduct its legislatively required cost-benefit analysis just before the final decisions.

“This will not give stakeholders any meaningful opportunity on the factors the Reserve Bank has taken into account when making its assessment,” the law firm says.

A number of other submitters have said RBNZ should have started its review of bank capital requirements with a cost-benefit analysis.

“There have been historic concerns about how the Reserve Bank conducts and tests the cost-benefit analysis in respect of its preferred policy option and whether this is exposed to the same rigour as the cost-benefit analysis provided by stakeholders in support of alternative options,” Chapman Tripp says.

It cites the example of the cost-benefit analysis RBNZ did on its outsourcing policy review – as with the bank capital proposals, the RBNZ’s outsourcing cost-benefit analysis came at the end, not the beginning, of the process.

RBNZ estimated the cost to the banking industry of its outsourcing policy would be $550 million, a figure arrived at by taking one bank’s view of its costs and multiplying by five. Paragraph 221 of that regulatory impact statement said the chosen bank “is fairly representative of the sector.”

RBNZ expected the net benefits of the policy would be $2.2 billion, although it warned that its figures were “an indication only.”

However, the banks themselves estimated the costs at $870 million and the net benefits at $1.9 billion.

Chapman Tripp says market participants have commented that RBNZ “is overly optimistic about the benefits of its proposal and may have underestimated the potential costs.”

For example, RBNZ has estimated the capital proposals would lift the interest rate charged on mortgages by 20-40 basis points and has specifically dismissed as an “outlier” UBS’ calculation that they would raise mortgage rates by 80-125 basis points.

“While there may be a self-serving element to some of these criticisms and there is rarely agreement among economists, we think that, for proposals of this significance, it is important that the Reserve Bank is transparent and has an open mind to feedback,” the law firm says.

“Without this, we question whether stakeholders will have confidence in the Reserve Bank’s final decisions on the matter.”


© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Energy Sector: Meridian Spilled Water To Hike Electricity Prices - Authority Ruling

The Electricity Authority has found that generator Meridian Energy manipulated the power market, costing consumers about $80 million. More>>

ALSO:

XE Data Update: RBNZ Official Cash Rate Decision

The RBNZ will keep the Official Cash Rate (OCR) at 0.25%. T he key points in the RBNZ statement are: RBNZ keeps the OCR unchanged at 0.25% Maintain the LSAP (large scale asset purchase) at NZD$60 billion. Committee prepared to use additional monetary ... More>>

ALSO:

Electricity: Kiwis Ignore Promise Of Cheaper Power

Electric Kiwi and Flick Electric Co are joint winners of Canstar Blue’s award for Most Satisfied Customers | Electricity Providers From putting on an extra layer – rather than turning on a heater – to turning off lights and choosing the energy-saving ... More>>

ALSO:

Economy: COVID-19 Contributes To 1.6 Percent Fall In March Quarter GDP

Gross domestic product (GDP) fell 1.6 percent in the March 2020 quarter, the largest drop in 29 years, as the initial effects of COVID-19 restrictions impacted on economic activity, Stats NZ said today. This quarter’s GDP results showed a widespread drop ... More>>

ALSO:


Electricity: Transmission Pricing For A Low Carbon Future

The Electricity Authority has decided on new guidelines for transmission pricing. James Stevenson-Wallace, Chief Executive of the Electricity Authority says the new guidelines will deliver significant benefits to consumers, through lower electricity ... More>>

ALSO:

ASB: Investor Confidence Falls To Four-Year Low

As the world grapples with the fallout from the most significant pandemic the world has seen in a century, economic concerns are weighing on investors, dragging investor confidence down to a four-year low in the first quarter of the year. For the three ... More>>

ALSO:

Science Media Centre: Funding For R&D In New Zealand – Expert Reaction

Research, Science and Innovation Minister Dr Megan Woods has today announced $401.3 million funding for research and development through Budget 2020 and the COVID Response and Recovery Fund. The fund includes $150 million for an R&D loan scheme, ... More>>

ALSO:


Science: 2019 Prime Minister’s Science Prizes Announced

The 2019 Prime Minister’s Science Prizes have been announced in a digital livestream event today. The Prizes recognise the impact of science on New Zealanders’ lives, celebrate the achievements of current scientists and encourage scientists of the ... More>>

ALSO:


RNZ: Fuel, Alcohol Costs To Go Up From Today

The increase today in the taxes on fuel, road user charges and alcohol is being called a tone-deaf move. More>>

ALSO:

Stardome Observatory: Young Kiwi Astro-Photographer Shoots For The Stars

Matariki by Josh Kirkley. The stars are aligning for up-and-coming Auckland-based astro-photographer Josh Kirkley (Kāi Tahu). During lockdown, one of his images was picked up by NASA and shared on the space agency’s Instagram to its 59.2 million ... More>>


DCANZ: Time For EU To Commit To A Level Playing Field For Trade

The Dairy Companies Association of New Zealand (DCANZ) has welcomed New Zealand Trade Minister David Parker’s statement that it is unacceptable for New Zealand exporters to continue facing an ‘unlevel playing field’ in the EU. Details leaked ... More>>

ALSO:

Potatoes New Zealand: Protecting NZ Fries As Part Of PNZ Pandemic Recovery & Transformation Plan

Potatoes New Zealand has met with Minister Faafoi this week to discuss investigating the potential importation of heavily discounted frozen potato chips into New Zealand. With MBIE’s support we are undertaking an investigation to gather evidence of the ... More>>

ALSO:


New Zealand Government: Supporting Kiwi Businesses To Resolve Rent Disputes

The Government will legislate to ensure businesses that suffered as a result of the COVID-19 response will get help to resolve disputes over commercial rent issues, Justice Minister Andrew Little announced today. More>>

ALSO:


Science Media Centre: Understanding 5G Concerns – Expert Q&A


Recent attacks on cell phone towers have brought concerns over the rollout of 5G technology into sharp relief.
While scientific research has consistently shown that the technology does not adversely affect human health, public concerns about its impact have spread around the world, fueled in part by growing misinformation online. The SMC asked experts to comment... More>>

ALSO:


Trade: Record Monthly Surplus As Imports Dive

Imports in April 2020 had their biggest fall since October 2009, resulting in a monthly trade surplus of $1.3 billion, Stats NZ said today. “This is the largest monthly trade surplus on record and the annual goods trade deficit is the lowest ... More>>

ALSO: