Connected Exposures Policy Finalised

The Reserve Bank of New Zealand – Te Pūtea Matua has completed a review of its Connected Exposures policy, which included two rounds of public consultation. The finalised policy has now been published and is expected to come into effect on 1 October 2023.

Connected exposures are a bank’s exposures to its connected persons, for example, a bank’s owners or other entities in which the bank’s owners may have a substantial interest. Exposures can include loans, leases, deposits, investments or financial contracts with connected persons.

Director of Prudential Policy Kate Le Quesne says the Connected Exposures policy defines a connected person, sets out requirements to manage associated risks and provides a way to measure exposures to connected persons.

“The revised Connected Exposures policy aligns with our capital adequacy framework and supports financial stability by reducing the risk of a bank getting into trouble due to its exposure to a connected person or entity,” Ms Le Quesne says.

“The previous version of the connected exposure policy has been in place for more than ten years and was due for a review. We held our first consultation in November 2021 and our second one in January 2023.

“The feedback was supportive of the changes and included useful suggestions to make the policy easier for banks to implement, while still delivering the intended outcomes. We have incorporated almost all of the proposed changes and appreciate the time people took to share their views.”

We have now published the final policy document on our website, along with our responses to feedback received in the second round of consultation, and a regulatory impact assessment. We have also published the submissions that we received. We expect the revised policy to take effect from 1 October 2023 and will contact banks about required changes to their Conditions of Registration.

More information

• Review of the Connected Exposures policy for banks - Reserve Bank of New Zealand - Te Pūtea Matua (rbnz.govt.nz)
• BS8 Connected Exposures Policy (rbnz.govt.nz)
• BS8 Connected Exposures Regulatory Impact Assessment (rbnz.govt.nz)
• BS8 Review of Connected Exposures Policy Summary of Submissions and Final Decisions (rbnz.govt.nz)
• Connected Exposures policy review receives broad support - Reserve Bank of New Zealand - Te Pūtea Matua (rbnz.govt.nz)

© Scoop Media