Regulatory Alerts2021-06-16
Capital Buffer Response Framework Explainer
The Reserve Bank of New Zealand issued this framework to define escalating supervisory responses and distribution restrictions for banks that fail to maintain their Prudential Capital Buffer. The regime imposes a three-stage escalation of constraints on Common Equity Tier 1 and Additional Tier 1 distributions, requiring banks to submit progressively stringent capital restoration or recapitalisation plans. These measures are designed to incentivize capital restoration and reflect increased risk, with the framework coming into force on 1 October 2021.
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