Regulatory Alerts2022-05-17
Response to the Reserve Bank of New Zealand January 2019 consultation paper: 'How much capital is enough?'
Westpac submitted detailed feedback to the Reserve Bank of New Zealand's (RBNZ) January 2019 consultation paper on bank capital requirements, agreeing with the goals of soundness and efficiency but contending the RBNZ's analysis significantly underestimates the economic costs. Westpac argues that increased capital will not improve wholesale funding costs due to parental support, nor reduce deposit costs, and disputes the assumption of lower equity investor returns, projecting potential negative impacts like house price declines and reduced GDP. To achieve the RBNZ's objectives with lower economic impact, Westpac recommends amending risk-weighted asset measurement, allowing a higher proportion of AT1 capital, and setting minimum capital requirements to account for banks' capital management buffers.