Submissions are welcome until June 10
The Reserve Bank of New Zealand is inviting stakeholders to provide feedback on policy options for mutual banks to issue capital instruments.
Read more: Reserve Bank appoints chief economist/director of economics
In December 2019, RBNZ published the final decisions from the Capital Review which focused on improving the quality and quantity of capital banks are required to hold. One issue left unresolved from the review was on developing a bespoke capital instrument for mutual banks which could qualify as Common Equity Tier 1 (CET1) capital.
Currently, mutual banks in New Zealand are not able to issue instruments without compromising their mutual status, said Christian Hawkesby, deputy governor and general manager of financial stability.
Read next: Reserve Bank keeps OCR at current level
“Stakeholders have told us that the inability of mutual banks to issue CET1 capital instruments makes it difficult for those banks to raise high-quality, loss-absorbing capital efficiently,” Hawkesby said. “They’ve told us that this restricts mutual banks’ lending growth as it adversely impacts their ability to compete on a level playing field.”
The consultation paper seeks stakeholders’ views on two policy options on what could qualify as CET1 capital for mutual banks, based on comparable international approaches.
Submissions are welcome until June 10, 2022.
