RBNZ consults on Basel III capital adequacy reforms

RBNZ consults on Basel III capital adequacy reforms

The Reserve Bank today released a consultation paper on the implementation of Basel III capital adequacy requirements in New Zealand (http://www.rbnz.govt.nz/finstab/banking/4572979.html).

The Basel III reforms, developed by the Basel Committee on Banking Supervision, aim to strengthen the regulation, supervision and risk management of the banking sector, in light of the global financial crisis.

Reserve Bank Deputy Governor Grant Spencer said: "Capital provides a buffer to reduce the risk of a bank becoming insolvent as a result of unexpected losses, for example arising from a severe economic downturn. Robust bank capital requirements are therefore a critical part of a sound and efficient financial system."

The Basel capital adequacy standards apply to all locally incorporated New Zealand banks.

"The Reserve Bank is proposing to adopt most of the Basel III proposals into its standards, except for those that are less conservative than already in place, or that are not suited to New Zealand circumstances," Mr Spencer said.

"Our New Zealand banks are well capitalised and therefore relatively well positioned to meet the proposals set out in the consultation paper. The banks have been asked to submit a quantitative impact assessment to confirm the specific impact of the new proposals."

The Reserve Bank welcomes submissions on the consultation paper by 27 January 2012.

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