December 11th 2012 – The Reserve Bank today released the final capital adequacy standards, which apply to locally incorporated registered banks in New Zealand and implement the Basel III capital requirements.

The bulk of the new standards take effect from 1 January 2013 and set higher minimum requirements around how much regulatory capital must be held by registered banks, along with which financial instruments may be treated as regulatory capital.

A further key feature of the reforms is the introduction, from 1 January 2014, of a new counter-cyclical capital buffer that can be applied in times of excessive credit growth.

In addition to the final standards, a response to submissions (PDF 32KB) on the Reserve Bank’s earlier draft capital adequacy requirements has also been released.

The Basel III capital framework was introduced by the Basel Committee on Banking Supervision (BCBS) in December 2010 to raise the quality and level of capital in the global banking system.

Deputy Governor Grant Spencer said: “The final capital adequacy requirements released today considerably enhance the ability of the New Zealand banking system to absorb shocks, whatever their source.

“New Zealand banks are already well capitalised and this has made it easier for New Zealand to implement the Basel III package ahead of the schedule set by the BCBS,” he said.

While the key elements of the Basel III regime have been released today, two parts are still to be finalised by the Reserve Bank including counterparty credit risk and disclosure requirements. New disclosure requirements will take effect from 31 March 2013. The counter-party credit risk requirements will take effect in early 2013.

Re-disseminated by The Asian Banker