27.07.2019

Capital adequacy requirements update

The RBNZ capital adequacy requirements are still working their way through the review process, with commentators saying the Reserve Bank’s proposal to almost double the capital requirements applying to the ‘big four’ Australian-owned New Zealand banks could have major repercussions for the economy.

Depending on who you talk to, the severity of these repercussions range wildly, and lawyers Mark Reese and Ross Pennington of Chapman Tripp suggest the RBNZ’s proposal would benefit from an independent review: https://www.interest.co.nz/opinion/99700/chapman-tripps-mark-reeves-and-ross-pennington-suggest-rbnzs-proposals-increase-big

Regardless of whether bank capital requirements are increased or not, Reserve Bank Deputy Governor and Head of Operations Geoff Bascand says banks, non-bank deposit takers and insurers can expect a "more intensive" and "more intrusive" supervisory approach from their prudential regulator.

In a speech to the Financial Markets Law Conference last month, he said there is a strong case for further increasing the intensity of the RBNZ’s supervisory model.

“Regulated entities can expect our supervision to be more intrusive, in seeking evidence that attestations are merited and verifying compliance, and that we will intervene and enforce our requirements.”

Read more here: https://www.interest.co.nz/banking/100416/deputy-governor-geoff-bascand-says-reserve-banks-regulatory-approach-be-more-pro