Regulatory Alerts2023-08-22
Regulatory treatment of loans in the North Island Weather Events Loan Guarantee Scheme
The Reserve Bank of New Zealand issues this letter to define the regulatory capital and risk treatment for banks participating in the North Island Weather Events Loan Guarantee Scheme. Standardised banks may treat these exposures as claims on corporates risk-weighted at 20%, while IRB banks are permitted to apply specific Loss Given Default adjustments reflecting the Crown's 80% credit risk coverage. The guidance also clarifies that performing loans do not require movement to Stage 2 under IFRS9 and outlines model update procedures for IRB banks without requiring formal approval.
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