The RBNZ proposes to remove the aggregate gross exposure limit and to allow banks to recognise credit risk mitigations when measuring aggregate net exposures.
Digital banks and unit investment trust funds can also participate in the secondary market for central bank securities.
Malkapur Urban Bank will continue to have the business and operational restrictions in place until its financial position improves.
The new framework seeks to strengthen financial resilience rather than require banks to raise additional capital, APRA says.
Heritage Bank will also have to complete a remediation programme to address governance and risk management concerns.
An independent report found issues were acknowledged by the board for several years but they were not given due attention or effective remediation.
PMC Bank will be merged into Unity Small Finance Bank, which was set up on 1 November by financial services conglomerate Centrum Group and fintech firm Bharatpe.
Banks need to prepare their systems for the future introduction of DSRs, and should be operationally ready to implement a regulated DTI limit by end-2022.
JP Morgan, BNP and Goldman have moved to higher buckets, meaning they will have to hold larger capital buffers from 1 January 2023.
Banks will have to hold 30 percent of their LCR net cash outflows in self-securitised assets as contingency for periods of stress.
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