Gareth Vaughan, sitting in for Bernard Hickey, details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand including news that Cabinet is today expected to approve legislation aimed at fast tracking reconstruction work in Canterbury after the big September 4 earthquake.
Ministers will brief cabinet colleagues on implications for their portfolios of the earthquake. Earthquake Recovery Minister Gerry Brownlee says cabinet will then consider temporary emergency legislation to help clear the way for reconstruction work. Vital reconstruction needed, according to Brownlee, includes repairing the sewage system. Parliament is expected to sit under urgency tomorrow to consider the legislation.
The Basel Committee on Banking Supervision decided over the weekend to introduce new rules and ratios described as the strictest since countries teamed up to regulate the global banking system in 1974. The regulators from 27 nations, including Australia, have decided banks must double their capital requirements over the next eight years as the new rules are introduced following the Global Financial Crisis.
Lenders will be forced to have common equity equal to at least 4.5% of assets, weighted according to their risk. Regulators will introduce an additional capital buffer of 2.5% to withstand future stress. Banks that fail to meet the second buffer won’t be allowed to pay dividends, although they won’t be forced to raise cash.
Critics have raised concerns the new rules will force up borrowing costs for customers and curb lending just as the global economic recovery is struggling to get going.
The Reserve Bank of New Zealand isn't a member of the Basel Committee but is being kept in the loop on developments by the likes of the Australian Prudential Regulation Authority, the Executives' Meeting of East Asia-Pacific Central Banks, or EMEAP, which is a cooperative organisation of central banks and monetary authorities, and the Basel consultative group of smaller countries which the Reserve Bank is a member of.
The Reserve Bank says it will consider all aspects of the global regulatory discussion and will look to change standards where doing so is appropriate for the New Zealand financial system.
Meanwhile, a group of Hanover Finance debenture investors is considering mounting a legal challenge to last December’s deal that saw Allied Farmers swap its shares for their debentures, The Sunday Star-Times reports.
The investors have hired Auckland barrister Tim Rainey to evaluate legal options, and to investigate whether any misrepresentation occurred, both in the prospectus presented to Hanover debentureholders, and in statements made on investor roadshows.
Hanover's loan and property book was valued at NZ$396.2 million in December’s deal and is now valued at just NZ$94.3 million.
The deal saw some 16,400 Hanover Group investors issued 1.9 billion Allied Farmers shares valued at 20.7 cents each. Allied Farmers shares closed at just 3.4 cents on Friday.