Capital Review Decisions and Capital Review Go-to Guide

Aim: To set out final decisions from the Reserve Bank’s Capital Review, and to explain the over-arching rationale underpinning the 2019 reforms.

Outcome: At the end of this module advisers will understand what the changes are, the rationale for the changes, and the impact it is likely to have on borrowers.

Abstract: In 2017, the Reserve Bank launched a review of its capital framework for banks, known as the “Capital Review”. After extensive rounds of consultation, analysis of feedback plus additional analysis, the Reserve Bank has completed that process. This module comprises two documents:

  • RBNZ Capital Review Go to Guide

  • RBNZ Capital Review Decisions 2019

These set out the RBNZ’s final decisions and rationale for those decisions.

The 2019 reforms include adjustments to the 2018 proposal in five main areas: the instrument accepted as AT1 capital, the contribution AT1 capital can make to Tier 1 capital, the capital required of non-systemic banks, the leverage ratio, and the transition period. The 2019 reforms also confirm a continued role for Tier 2 in the capital framework.

Exposure drafts of the capital chapters in the Banking Supervision Handbook will be available for consultation by 1 April 2020 with the revised chapters expected to be finalised and coming in to effect on 1 July 2020. At that point, the Transition Period will begin.