Financial Services

RBNZ proposes capital ratio increase to 16 pct for top banks


WELLINGTON, Feb 22 (Reuters) – A new capital requirement proposal by the Reserve Bank of New Zealand (RBNZ) will allow five years for the country’s top four banks to boost capital ratios to 16 percent from 12 percent now, the central bank said on Friday.

The RBNZ expected a combined increase in capital of about NZ$20 billion for the big four banks and about a NZ$0.9 billion increase for other smaller banks, Deputy Governor Geoff Bascand said in a briefing for journalists.

The RBNZ said in December that it was considering raising the capital banks would need to hold to bolster the capacity of the financial system to handle any shocks.

The big four banks in New Zealand are Australian lenders ANZ Bank, Commonwealth Bank, National Australia Bank (NAB) and Westpac.

Bascand said the banks have a number of options, including retaining more profits over several years or raising more capital from shareholders.

RBNZ estimated the big four banks could achieve capital requirements by retaining 70 percent of their net earnings over five years while the smaller banks could take about seven years.

The consultation period for the proposal was extended last month to May 3 from March 29. (Reporting by Praveen Menon; editing Darren Schuettler)



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