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Reserve Bank issues Basel III capital adequacy standards for NZ banks, says they're already well capitalised easing path for NZ implementation

Bonds
Reserve Bank issues Basel III capital adequacy standards for NZ banks, says they're already well capitalised easing path for NZ implementation

The Reserve Bank has reiterated that it'll introduce its version of the global Basel III capital adequacy reforms from January 1, 2013 and has issued the capital adequacy standards that will apply to New Zealand banks under Basel III.

Reserve Bank Deputy Governor Grant Spencer said the new capital adequacy requirements "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 Basel Committee on Banking Supervision,” Spencer said.

The Basel III capital framework was introduced by the Swiss-based Basel Committee in December 2010, with Group of 20 (G20) approval, in response to the Global Financial Crisis in an attempt to raise the quality and level of capital in the global banking system. See all our stories on Basel III here.

"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," Spencer said.

"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."

Two aspects of the Reserve Bank's Basel III regime are yet to be finalised being counter-party credit risk and disclosure requirements. The Reserve Bank says, nonetheless, that new disclosure requirements will take effect from March 31 next year and the counter-party credit risk requirements will take effect in early 2013.

A response to submissions on the Reserve Bank’s earlier draft capital adequacy requirements has also been released.

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