New Zealand Proposes Tighter Capital Requirements for Banks

New Zealand will introduce tougher capital adequacy requirements for banks starting Jan. 1 as the nation moves to adopt so-called Basel III rules, the Reserve Bank said.

The proposed changes include increased capital requirements for banks that will strengthen the ability of lenders to absorb losses, the Wellington-based central bank said in an e-mailed statement.

“Banks’ overall capital levels are strong and generally already exceed the new requirements,” deputy governor Grant Spencer said in the statement. “While some technical features of bank capital instruments will be fairly new to capital markets, they are likely to become a feature of bank capital internationally.”

The Basel III changes are aimed at strengthening the international banking system, and New Zealand’s plans are mostly in line with those of Australia’s bank regulator, Spencer said. New Zealand’s four largest lenders, which handle about 90 percent of all deposits, are all wholly owned units of Australian banks.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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