Regulatory Alerts2022-05-17
BS 2B - Capital adequacy framework (internal models based approach)
The Prudential Supervision Department of the Reserve Bank of New Zealand issued BS 2B to establish the methodology for locally incorporated registered banks accredited to use internal models for calculating capital ratio requirements. The document defines tier one and tier two capital components, specifying strict eligibility criteria, deductions, and limits for instruments such as share capital, preference shares, and subordinated debt. It further mandates the application of the Internal Ratings Based approach to credit risk, alongside frameworks for market risk, operational risk, funds management, and insurance business activities within the banking group.
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