Regulatory Alerts2022-05-17
Capital Adequacy Framework Internal Models Based Approach
The Prudential Supervision Department of the Reserve Bank of New Zealand issued document BS2B to establish the methodology for accredited registered banks to calculate capital ratio requirements using internal models based approaches. The framework defines capital composition by specifying strict criteria for Tier One and Tier Two capital, including detailed eligibility rules for share capital, reserves, and subordinated debt, alongside mandatory deductions from total capital. It further mandates specific consolidation rules for banking groups and subsidiaries to ensure accurate assessment of capital adequacy for both solo and consolidated bases.
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