The RBNZ is consulting on new rules for the instruments that make up a bank’s capital, and proposed actions it will take if banks breach prudential capital buffer requirements.
The guidance will support jurisdictions and authorities in determining whether there is a gap in the resources and tools available for CCP resolution.
The move follows an order from the BOT for commercial banks to suspend interim dividend payments and share buybacks in June.
The central bank has said it could introduce selective credit controls if necessary to ensure financial system stability amid an over-heating property market.
The bill was fast-tracked amid fears that loan defaults could burden lenders and hamper their ability to provide credit to businesses and consumers.
The pandemic raised questions of whether the flexibility provided in the Basel framework is actually used by FIs, for example in the case of bank capital and liquidity buffers.
JP Morgan and China Construction Bank were raised to a higher bucket; Goldman Sachs and Wells Fargo were moved to a lower bucket.
The RBNZ will also consult on re-instating LVR restrictions, maintain dividend restrictions for banks, and launch a new facility to provide cheap funding for banks.
Collateral is one of the more underutilised credit risk mitigation tools available to banks, and likely to become more important as loan losses mount in the year ahead.
Regional banks can earn the interest rate by meeting certain overhead reduction targets or by agreeing to a merger with another bank.
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