Regulatory Alerts2022-05-17
Capital review: Current standards and international comparisons
The Reserve Bank of New Zealand issued this memorandum to assess its capital adequacy standards against international benchmarks, noting that its approach is generally more conservative than Basel requirements. The document highlights that direct comparisons are difficult due to implementation differences, though evidence suggests New Zealand banks hold capital equivalent to an additional 1-2 percentage points of CET1 under Basel rules. It concludes that while New Zealand standards appear less conservative in areas like Pillar 2 add-ons, the overall framework maintains a margin of safety that is obscured by lower reported capital ratios resulting from higher risk weights.
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