Reserve Bank invites feedback on dual reporting requirements

The Reserve Bank of New Zealand – Te Pūtea Matua is inviting feedback on the dual reporting requirements that follow the Capital Review.

We launched our fundamental review of the capital adequacy framework for New Zealand registered banks (the ‘Capital Review’) in March 2017. The final policy decisions were published in December 2019.

Under our capital adequacy framework, banks may be accredited to use their own internal-ratings based (IRB) models to calculate risk weighted assets (RWAs) for credit risk. Other banks calculate their RWAs using a standardised approach, with the risk-weights defined by us, Deputy Governor and General Manager of Financial Stability Christian Hawkesby says.

“As part of the Capital Review, we proposed a number of different options for improving the transparency of capital calculations by IRB banks. In the December 2019 final policy decisions we confirmed we would go ahead with a proposal referred to as ‘dual reporting’ whereby IRB banks are required to publish ­ both their modelled RWAs, and also their standardised equivalents.”

Our plan in December 2019 was that dual reporting would begin from 1 January 2021. However, in line with other regulatory relief initiatives offered by the Reserve Bank due to the COVID-19 pandemic, implementation was delayed. We are now planning to bring the dual reporting requirements into effect from 1 July 2022, to apply to disclosure statements with reporting dates starting at the end of September 2022.

The dual reporting consultation paper details our proposal further. Our main objective is to show the differences in banks’ RWA calculations from using IRB models rather than the standardised approach.

We invite feedback from all interested parties by 3 May 2022 on what level of detail is needed, whether the reporting tables are clearly laid out, and what the cost implications of providing additional layers of detail are for the IRB banks.

/Public Release. This material from the originating organization/author(s) may be of a point-in-time nature, edited for clarity, style and length. The views and opinions expressed are those of the author(s).View in full here.