Regulatory Alerts2022-12-07
Reserve Bank of New Zealand Response to Submissions on Mutual Capital Instruments
The Reserve Bank of New Zealand has decided to amend Banking Prudential Regulation 110 to introduce a new Mutual Capital Instrument that qualifies as Common Equity Tier 1 capital. The regulator selected Option 1B, the Mutual Equity Tier 1 capital instrument, as the preferred design because it best aligns with ordinary share eligibility criteria regarding subordination and proportionality. This decision allows mutual banks to raise high-quality capital without demutualising, while incorporating a board-discretionary cap on investor wind-up entitlements to protect member interests.
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