Date 14 July 2017
Reserve Bank consults on what should qualify as bank capital
The Reserve Bank has started a public consultation about what type of financial instruments should qualify as bank
capital.
Capital regulations address not only the minimum amount of capital that banks must hold, but also the type of financial
instruments that qualify as capital. The consultation that starts today is about the nature of financial instruments
that are suitable, rather than the amount of capital.
Important considerations for regulations about bank capital include: the Reserve Bank’s regulatory approach; the
resolution regime in the event of a bank facing difficulties; international standards issued by the Basel Committee on
Banking Supervision; the Reserve Bank’s experience with the current capital regime; and the fact that dominant
participants in the New Zealand banking market are subsidiaries of overseas banks. The consultation paper discusses
these issues and outlines five options for reforming existing regulations.
The Bank’s proposed reforms to capital regulations aim to reduce the complexity of the regulatory regime; provide
greater certainty about the quality of capital that banks hold; and reduce the scope for regulatory arbitrage.
The consultation closes at 5pm on Friday 8 September.
ends