Banks comfortably placed to meet incoming RBNZ capital requirement that if not met could see dividends restricted

By Gareth Vaughan

The country's banks appear well placed to meet an imminent new Reserve Bank capital requirement, which if they breach could see their dividend payouts restricted.

Figures taken from the latest round of general disclosure statements show banks' capital levels sitting well above Reserve Bank mandated minimums. Minimum capital requirements for banks are designed to cover credit risk, market risk and operational risk, and be used to absorb losses where necessary.

The banks must meet three key capital ratios; a common equity tier one capital ratio equivalent to at least 4.5% of total risk-weighted exposures, a tier one capital ratio equivalent to at least 6% of total risk-weighted exposures, and a total capital ratio equivalent to at least 8% of total risk-weighted exposures. From January 1 they also need a buffer ratio for common equity tier one capital of at least 2.5%.

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