Reserve Bank of New Zealand Review of Connected Exposures Policy BS8 Consultation Submissions

UNCLASSIFIED UNCLASSIFIED Contents Bank of New Zealand submission..........................................................................................................3 ANZ Bank New Zealand Limited submission ......................................................................................4 ASB Bank Limited submission.................................................................................................................5 The New Zealand Financial Markets Association (NZFMA) submission .................................... 10 The New Zealand Bankers’ Association (NZBA) submission ......................................................... 16 SBS submission .........................................................................................................................................22 Rabobank submission .............................................................................................................................24 Westpac New Zealand Limited and China Construction Bank (New Zealand) Limited also provided feedback but asked that it not be publically released.

30 March 2022 Confidential By email: shoko.seta@rbnz.govt.nz RBNZ Review of Connected Exposures Policy (BS8) Thank you for the opportunity to respond to the Review of the Connected Exposures Policy (BS8), released on 20 November 2021. ANZ Bank New Zealand Limited (ANZB) is a registered bank in New Zealand. It is a locally incorporated subsidiary of the Australian incorporated entity, Australia and New Zealand Banking Group Limited (ANZBGL). ANZB has contributed to, and supports, the submission from the New Zealand Bankers’ Association. In addition to supporting that submission, ANZB has compiled the information requested by the RBNZ under questions 6, 15 and 16 in the attached spreadsheet, under tabs 1 to 3. Tab 4 of the spreadsheet provides an extract from our 2021 Annual Report to show the reconciliation to related party exposures. Tab 5 provides the list of ANZB’s connected persons as requested by question 3. Publication of information ANZB does not consent to the publication of this information and requests that the spreadsheet is withheld from publication in its entirety, together with the details of the ANZB contact person and signatory, in order to protect the privacy of natural persons or on the grounds of commercial sensitivity, under the RBNZ’s publication of submissions policy. Contact for submission We welcome the opportunity to discuss our response. Please contact Richard Jones at his email address Yours sincerely, Stuart McKinnon Managing Director, Institutional, New Zealand ANZ Bank New Zealand Limited ANZ BANK NEW ZEALAND LIMITED

31 March 2022 Shoko Seta Financial Systems and Policy Analysis Department Reserve Bank of New Zealand PO Box 2498 Wellington 6140 By email: shoko.seta@rbnz.govt.nz Dear Shoko ASB response – BS8 Connected Exposures policy consultation ASB Bank Limited (ASB) welcomes the opportunity to provide feedback to the Reserve Bank on its BS8 Connected Exposures Policy. ASB makes the following key points: • Overall, ASB is supportive of the changes proposed to the connected exposures policy, as this will reduce ambiguity and create better consistency with capital adequacy frameworks as proposed. • We agree that a gross exposure limit is not necessary if proposed changes are made. • More clarity is needed on what is intended to be captured under interbank exposures. A specific list of inclusions/exclusions will be helpful. • It would be helpful to understand how the changes proposed will dovetail into the Deposit Takers Act regime for example how any new BS8 policy will transition into Standards; and how any conduct requirements would align with the directors’ duties which are proposed in the exposure draft of the Deposit Takers’ Act. Further detail on these points is set out in the enclosure to this letter. We acknowledge that ASB’s submission may be published on RBNZ website and may be released in response to a request under the Official Information Act. ASB seeks confidentiality in respect of one aspect of our response on interbank exposures, Annex 1 provided, and my direct contact details below. If you require any further information in relation to this submission, please do not hesitate to contact me. Yours faithfully, Jennifer Bourne Senior Manager, Government Relations & Regulatory Affairs ASB Bank Limited [REDACTED] Enc.

---

ASB comments

---

Overall Approach to amend the Connected Exposures Policy ASB agrees with the approach to amending the connected exposures policy, being that it should be consistent with the existing relevant frameworks, i.e., the capital adequacy framework, and take the simplest approach. Overall, we are supportive of the proposed changes to the policy, as this will reduce ambiguity in interpreting the requirements of the policy, which is welcome. We also agree with the NZBA submission, in that we do not think there are any adverse impacts from the proposed changes. Comment on detailed proposals We have commented on some of the detailed proposals below. Exposure measure ASB agrees with the general principles in relation to exposure measure. We agree with the NZBA’s ask for clarity as to whether the Credit Conversion Factor (CCF) would apply just in the context of the BS8 policy or more widely to Capital Adequacy calculations. We also note that note that it appears somewhat inconsistent to have a bespoke CCF for contingent credit exposures, in this case off-balance sheet contingent liabilities. ASB supports: • the proposal to replace the terminology of “market-related contracts” with “derivatives and securities financing transactions (SFTs)” • the proposal to allow IRB banks to use gross exposure values, if netting of any impairment allowances is operationally burdensome. Recognition of Eligible Credit Risk Mitigations ASB supports the proposal to allow banks to recognise credit risk mitigations eligible under the BPR131: Standardised Credit Risk RWAs, applying the same requirements, conditions and eligibility criteria for the recognition of collateral, guarantees, and credit derivatives as under the standardised approach in BPR132 and Part E of BPR131. These will be positive changes from our perspective. ASB uses the ISDA master agreement for netting agreements. In response to Question 16 of the consultation, ASB is not contemplating using other bilateral netting agreements with counterparties at this stage. Interbank exposures We support the NZBA’s submission on this in relation to having further clarification on the intent around including interbank exposures, specifically the treatment of intra-day exposures. An example would be settlement limits. [REDACTED]. A specific list of inclusions/exclusions would therefore be helpful, for the avoidance of doubt.

Generally, ASB supports alignment with standardised capital treatments. Definition of Connected Person ASB supports the NZBA submission in relation to the definition of connected person in seeking further clarity in relation to what 4 (e) (ii) and 4 (e) (iv) would capture. Conduct requirements and the IMF 2017 recommendation ASB believes that its attestation framework is sufficient and effective because it already requires director-level review for banks’ disclosure statement processes, so it is unclear what additional assurance Board approval would add. It would be helpful to understand how the RBNZ propose to align any new conduct requirements with those proposed under the Deposit Takers Act (DTA), as there is potential overlap. The DTA (in Bill form) as currently drafted, will introduce a Directors’ Due Diligence Duty under s88, and this applies in relation to ‘prudential obligations’. This is a broad definition and will not be defined until the DTA, secondary legislation, Standards and any conditions of licence are known. ASB assumes that the current BS8 policy will eventually be a Standard under the DTA, to which this duty (and its corresponding penalties) would apply. Gross Exposure Limit ASB’s view is that if credit risk mitigations are well-defined, as proposed, and consistent with capital adequacy requirements, then a gross exposure limit calculation is not necessary. Net Exposure Limits Please see Annex 1 for an estimate of ASB’s aggregate net credit exposures, reflecting the proposals. Surveys and information collection We support consistency with the RBNZ Large Exposure Survey. ASB’s view is that, given the granular nature of the data proposed, then de minimus value thresholds will be needed. Otherwise, there may be the unintended consequence, particularly for large banks, to report very low-level exposures, for example, a single director’s credit card exposure. It would be helpful to understand what legislative powers the RBNZ would propose to collect the data under, given it would include personal data and therefore have heightened confidentiality; and how this might change, given that the DTA in its current draft includes information gathering powers. Implementation proposals We share the wider industry view as set out in the NZBA response to this consultation, ASB’s view is that implementing the amended BS8 at the same time as or after the upcoming implementation of the Dual Reporting Requirements, may not provide banks with sufficient time, if final decisions are released around Q2/Q3 of 2023. If RBNZ choose to apply bespoke measurements limits then this will increase complexity and require more implementation time - for example, if a 100% CCF was applied to aspects of the calculations. Ease of implementation will also depend on what exposures are exempt. We also note that there would be a 12-month lag between exposure measurements.

The consultation paper refers to any eventual policy changes being enacted by replacing section BS8 of the Banking Supervision Handbook (“Connected Exposures Policy”) with a reformatted 'Banking Prudential Requirements' (BPR) document. It is not clear how it will dovetail with the Deposit Takers Bill, which will introduce Standards, replacing the current Handbook. .

Annex 1: ASB’s estimated aggregate net credit exposures [REDACTED]

NZFMA Submission to the Reserve Bank of New Zealand on the Review of the Connected Exposures Policy (BS8)

2 New Zealand Financial Markets Association Level 12, ANZ Centre, 171 Featherston Street, P O Box 641, Wellington, New Zealand │ T: +64 4 499 9169 │ E: info@nzfma org │ W: www nzfma.org The New Zealand Financial Markets Association (NZFMA) is the professional body for wholesale banking and over-the-counter markets in New Zealand and represent our members in promoting sound operation of over-the-counter financial markets. The following nine New Zealand registered banks are Financial Markets members of NZFMA: ANZ Bank New Zealand Limited ASB Bank Limited Bank of China (NZ) Limited Bank of New Zealand China Construction Bank Citibank N.A. The Hongkong and Shanghai Banking Corporation Limited Kiwibank Limited Westpac New Zealand Limited The NZFMA welcomes the opportunity to provide feedback to the Reserve Bank of New Zealand (RBNZ) on the Review of the Connected Exposures Policy (BS8) consultation paper. The NZFMA and its member banks have been engaging for some time with RBNZ on the interpretation of the Connected Exposures Policy (BS8) in relation to the requirement to report exposures under ISDA Agreements and Global Master Repurchase Agreements (GMRAs). The requirement to report these exposures on a grossed-up basis, without taking into account variation margin or certain transactions under repurchase agreements (Repos), has had some impact on the ability of our member banks to; access wholesale funding, support the market for New Zealand government bonds (by providing access to new participants in the market through our parents to their customers) and effectively manage risk. We are grateful that RBNZ has made addressing these concerns a core focus of this consultation. To the extent that there was concern about ambiguity in BS8, we welcome the proposed clarifications, and we support the proposed changes which will align New Zealand's approach with international best practice.

4 New Zealand Financial Markets Association Level 12, ANZ Centre, 171 Featherston Street, P O Box 641, Wellington, New Zealand │ T: +64 4 499 9169 │ E: info@nzfma org │ W: www nzfma.org including the provision of loans to connected persons and the writing off of such loans. The Reserve Bank also welcomes your feedback as to what the compliance costs impacts would be under Option 2. Q5. The Reserve Bank welcomes views regarding the gross exposure limit. Do you consider a gross exposure limit is still required? What would be the consequences of abolishing it? Please provide evidence and send us any supporting information. We support the removal of gross exposure limits. We do not see any policy reason for imposing this limitation where there are clear guidelines relating to netting and the quality of collateral that align with international best practice. Removing gross exposure limits would align New Zealand with the approach taken by both the Australian Prudential Regulation Authority and the Basel Committee on Banking Supervision in their standards for large exposures. We believe removing gross exposure limits will also be consistent with RBNZ’s policy of defining credit exposure as the maximum possible loss that a party could face if their connected person did not fulfil the contract. Q6. To the extent possible, please submit an estimate of your aggregate net credit exposures reflecting the changes proposed in this consultation paper. This question is best suited to bank specific responses. Q7. The Reserve Bank welcomes views on changes to the surveys. Please indicate if there are any practical concerns or challenges in relation to the additional information collection. This question is best suited to bank specific responses. Q8. The Reserve Bank welcomes views on implementing the amended BS8 at the same time as or after the upcoming implementation of the Dual Reporting Requirements. We support the timing of implementation of the new connected exposure policy being aligned with the implementation of the Dual Reporting Requirements. Q9. The Reserve Bank welcomes views on our proposed changes and any impacts that banks and the financial system may encounter with the proposed changes. We also seek any feedback about possible risks that might result from allowing more bilateral netting agreements to be eligible under the Connected Exposures Policy. Based on the example provided on page 24 of the consultation paper, we believe that the proposed changes to the connected exposures policy will address the adverse impacts of the policy that we have outlined in previous communications. We note that the RBNZ is proposing that this position is reached on the basis that variation

5 New Zealand Financial Markets Association Level 12, ANZ Centre, 171 Featherston Street, P O Box 641, Wellington, New Zealand │ T: +64 4 499 9169 │ E: info@nzfma org │ W: www nzfma.org margin and repo transactions would be "credit risk mitigants" rather than reducing the outright exposure of the parties.1 As you are aware, this is an issue which creates challenges for our member banks because of the contrary position taken by our legal advisors. We would like to continue to engage with the RBNZ on the impacts of these competing views and how these can be addressed. However, for the purposes of the connected exposures policy, the ability to report on exposures net of variation margin and repo transactions is our primary concern and this is achieved by your proposed changes. Q10. The Reserve Bank welcomes views on these general principles for exposure measure? This question is best suited to bank specific responses. Q11. The Reserve Bank welcomes views on the replacement of the terminology of “market related contracts” with “derivatives and securities financing transactions (SFTs) We have no concerns with this proposed change in terminology. Q12. The Reserve Bank welcomes views on the proposal to allow IRB banks to use gross exposure values, if netting of any impairment allowances is operationally burdensome This question is best suited to bank specific responses. Q13. The Reserve Bank welcomes views on our proposed application of a flat 100% CCF for off￾balance sheet commitments to connected persons. Please quantify your feedback, particularly if you disagree with our proposed flat 100% CCF. This question is best suited to bank specific responses. Q14. The Reserve Bank welcomes views on our proposed clarification of the measurement methodologies for financial instruments issued by a bank’s connected persons or derivatives with underlying financial instruments issued by a bank’s connected persons. Please quantify your feedback, particularly if you disagree with our proposed clarification. This question is best suited to bank specific responses. 1 For completeness, we note that this is not how variation margin is treated in BRP131 at E3.1.

6 New Zealand Financial Markets Association Level 12, ANZ Centre, 171 Featherston Street, P O Box 641, Wellington, New Zealand │ T: +64 4 499 9169 │ E: info@nzfma org │ W: www nzfma.org Q15. The Reserve Bank welcomes views on (i) the proposal to apply in the connected exposure policy the same conditions and same treatment of CRMs as those in the standard approach in BPR132, and (ii) the proposal that banks would not be able to recognise unfunded contingent credit protection provided by a connected person (e.g., a guarantee, credit derivative and indemnity). To assess an impact of this proposed change, the Reserve Bank also request that banks send us a list of bilateral netting agreements that they are using (or intending to use) for derivatives and SFTs under BPR131 and BPR132 as well as, in the future if our proposed changes are implemented, under the connected exposure policy. We also seek any feedback about possible risks that might result from this proposed change. This question is best suited to bank specific responses. Q16. The Reserve Bank welcomes views on the proposal to allow on-balance sheet netting subject to meeting the requirements set out in C1.2 of BPR132. To assess an impact of this proposed change, the Reserve Bank also request that banks send us a list of bilateral netting agreements that they are using (or intending to use) for on balance sheet netting under BPR132 as well as, in the future if our proposed changes are implemented, under the connected exposures policy. We also seek any feedback about possible risks that might result from this proposed change. This question is best suited to bank specific responses. Q17. The Reserve Bank welcomes views on the proposed treatment of maturity mismatches under the Connected Exposures Policy. This question is best suited to bank specific responses. Q18. The Reserve Bank welcomes views on the clarification of the capital measure for the purposes of calculating the connected exposures limit. This question is best suited to bank specific responses.

NEW ZEALAND BANKERS ASSOCIATION Level 15, 80 The Terrace, PO Box 3043, Wellington 6140, New Zealand TELEPHONE +64 4 802 3358 EMAIL nzba@nzba.org nz WEB www.nzba.org.nz Submission to the Reserve Bank of New Zealand on the Review of the Connected Exposures Policy (BS8) – Consultation Document 31 March 2022

2 About NZBA

1. The New Zealand Bankers’ Association (NZBA) is the voice of the banking industry. We work with our member banks on non-competitive issues to tell the industry’s story and develop and promote policy outcomes that deliver for New Zealanders.
2. The following seventeen registered banks in New Zealand are members of NZBA: • ANZ Bank New Zealand Limited • ASB Bank Limited • Bank of China (NZ) Limited • Bank of New Zealand • China Construction Bank • Citibank N.A. • The Co-operative Bank Limited • Heartland Bank Limited • The Hongkong and Shanghai Banking Corporation Limited • Industrial and Commercial Bank of China (New Zealand) Limited • JPMorgan Chase Bank N.A. • Kiwibank Limited • MUFG Bank Ltd • Rabobank New Zealand Limited • SBS Bank • TSB Bank Limited • Westpac New Zealand Limited Introduction NZBA welcomes the opportunity to provide feedback to the Reserve Bank of New Zealand (RBNZ) on the Review of the Connected Exposures Policy (BS8) Consultation Document (Consultation Document). NZBA commends the work that has gone into developing the Consultation Document. Contact details
3. If you would like to discuss any aspect of this submission, please contact: Antony Buick-Constable Deputy Chief Executive & General Counsel Brittany Reddington Associate Director, Policy & Legal Counsel

4 (New Zealand Incorporated Registered Banks) Order 2014 (the Order). If the Reserve Bank does not want to fully align and expand the definition of connected persons as suggested above, we ask that the definition proposed be amended to include “directors and their controlled entities” so that this aligns with the accounting standard definition and will avoid confusion from having two different definitions in relation to directors. If the current definition remains, we seek clarification of the definition of “connected person” in the policy, specifically the application of 4(e)(ii) which refers to “an entity in which an owner has a substantial interest” as a connected person. We request clarity as to whether this is intended to capture entities an owner has an investment interest in, rather than an operational one. Our view is that entities that the owner has an investment interest in, for example private equity funds, should not be captured. These entities would have little ready insight into the underlying portfolios of these entities. We also seek clarity as to whether 4(e)(iv) under the proposed expanded definition is intended to capture family trusts, where the director is a trustee or beneficiary. 4 The Reserve Bank welcomes views on our proposed options to respond to the IMF’s recommendation. The Reserve Bank also welcomes your feedback as to what the compliance costs impacts would be under Option 2. Conflict of interest when providing loans to connected persons is managed through existing risk frameworks and policies that are approved by the Board. We do not see the need for explicit board approval of loans to connected persons and the writing-off of such loans. We recommend maintaining the current processes, as we consider Option 2 may have some unintended consequences. For example, Board approval would likely be required for use of a credit card with a small limit by a director. 5 The Reserve Bank welcomes views regarding the gross exposure limit. Do you consider a gross exposure limit is still required? What would be the consequences of abolishing it? We support the removal of this limit. 6 To the extent possible, please submit an estimate of your aggregate net credit exposures reflecting the changes proposed in this consultation paper. Our members will provide this information individually. 7 The Reserve Bank welcomes views on changes to the surveys. Please indicate if there are any practical concerns or challenges in relation to the additional information collection. We support consistency with the RBNZ Large Exposure Survey. We are concerned about providing identifiable personal loan balance information for individuals and their related parties. We consider that balances/data should be aggregated by nature of party and type of exposure,

5 rather than by individual counterparty, and categorised accordingly in the connected exposures survey, i.e.:

1. Counterparty type: Parent company (and other subsidiaries of the group); Directors (and their related parties); other Key Management personnel (and their related parties); Associates; Other related parties
2. Nature of balance: Loan, Securities, Derivatives (including cash collateral paid), other receivables (including nostros, etc). 8 The Reserve Bank welcomes views on implementing the amended BS8 at the same time as or after the upcoming implementation of the Dual Reporting Requirements. Our preference is for the Dual Reporting Requirements to be implemented before the BS8 amendments. Our members will require sufficient time for implementation following the release of final decisions, which we understand is expected to be released in Q2/3 2022. This timing would likely not provide a sufficient implementation period if implementation occurred at the same time as the Dual Reporting Requirements, scheduled for Q3 2022. 9 The Reserve Bank welcomes views on our proposed changes and any impacts that banks and the financial system may encounter with the proposed changes. We also seek any feedback about possible risks that might result from allowing more bilateral netting agreements to be eligible under the Connected Exposures Policy. We don’t consider there to be any adverse impacts as a result of the proposed changes. We don’t consider there to be any additional risks posed by expanding the range of eligible bilateral netting agreements. 10 The Reserve Bank welcomes views on these general principles. We recommend the general principles include an intention to keep this policy as simple as possible, in order to avoid any unintended consequences or administratively or operationally burdensome requirements. 11 The Reserve Bank welcomes views on the replacement of the terminology of “market related contracts” with “derivatives and securities financing transactions (SFTs)”. We support the proposed update to the terminology. 12 The Reserve Bank welcomes views on the proposal to allow IRB banks to use gross exposure values, if netting of any impairment allowances is operationally burdensome. We note that only some of our members are IRB banks. Those members support allowing IRB banks to use gross exposure values. 13 The Reserve Bank welcomes views on our proposed application of a flat 100% CCF for off-balance sheet commitments to connected persons. Please quantify your feedback, particularly if you disagree with our proposed flat 100% CCF. We seek clarification as to whether this proposal is specific to BS8, or whether this proposal extends to the Capital Adequacy Calculations. While we do support the proposal within the context of BS8, we do not support the 100% CCF being incorporated into the Capital Adequacy Calculations.

6 We would also welcome consideration and guidance on the treatment of uncommitted facilities, i.e. where express approval is required before drawdown. 14 The Reserve Bank welcomes views on our proposed clarification of the measurement methodologies for financial instruments issued by a bank’s connected persons or derivatives with underlying financial instruments issued by a bank’s connected persons. Please quantify your feedback, particularly if you disagree with our proposed clarification. Our preference is to use the on-balance sheet accounting values, in order to keep things simple and comparable to financial statement related party exposures as much as possible. We consider that referencing the capital standards will increase complexity. 15 The Reserve Bank welcomes views on (i) the proposal to apply in the connected exposure policy the same conditions and same treatment of CRMs as those in the standard approach in BPR132, and (ii) the proposal that banks would not be able to recognise unfunded contingent credit protection provided by a connected person (e.g., a guarantee, credit derivative and indemnity). We support allowing netting of cash collateral in derivatives exposure calculations. We would also support clarification of the definition of “risk lay-offs” – e.g., the situation where guarantee of an exposure to a non-connected person is provided by a connected person. This is currently excluded as the principal exposure is not to a connected person, but the guarantee is. 16 The Reserve Bank welcomes views on the proposal to allow on-balance sheet netting subject to meeting the requirements set out in C1.2 of BPR132. We support allowing on-balance sheet netting, noting the proposed consistency with BPR132. Some members have noted that while they don’t currently have any on-balance sheet bilateral netting agreements in place with any connected party, it may be a consideration for the future. An alternative would be to allow netting to the extent that it meets the on-balance sheet netting requirements of NZ IAS 32 or the offsetting requirements of NZ IFRS 7. 17 The Reserve Bank welcomes views on the proposed treatment of maturity mismatches under the Connected Exposures Policy. Some members have noted that introducing further complexity to the netting requirements will likely mean that, after considering implementation costs for what is a daily calculation, they may not apply all of the netting options available to reduce the risk of non-compliance. 18 The Reserve Bank welcomes views on the clarification of the capital measure for the purposes of calculating the connected exposures limit. We do not support this proposed change. There is no need to introduce an adjusted measure of Tier 1 capital. This will create confusion for users of disclosure statements as it will be an exception/difference that may need to be explained. For consistency with the Order disclosure requirements, the regulatory capital base used for the calculation (i.e., Tier 1 capital) should be the amount that the bank is regulated against and not an alternative measure.

1 From: Sonia Lawrence Sent: Thursday, 31 March 2022 12:52 pm To: Shoko Seta Cc: Tim Loan; India Power Subject: BS8 Consultation November 2021 Follow Up Flag: Follow up Flag Status: Flagged Categories: Yellow category Hi Shoko Thanks for the opportunity to provide feedback on your proposals in relation to the BS8 Connected Exposures Policy. The joint industry submission facilitated through the NZBA contains our primary feedback however this email contains our bank specific details around the connected exposure definition as requested within question 3 of your consultation paper. As a mutual building society, SBS is owned by it’s members who are customers. The rules of SBS outline that each member has one vote and, as such, there are no owners that hold a substantial interest or who have control. This means the only connected persons for SBS are directors. At this point in time, SBS has no credit exposures to directors and, after taking into consideration your proposed extended definition to also include related parties of a bank’s directors as connected persons, we do not expect this to change. As outlined in the industry submission our preference in relation to any changes to the definition of connected persons for directors is to align the definition to the related party definitions within financial reporting standards. This would allow the capture of this information once for both purposes and avoid confusion and complexity if these definitions do not align. I hope this information is useful. Please don’t hesitate to contact me if you have any questions or require anything further. Kind Regards Sonia Sonia Lawrence Prudential Regulatory Affairs Manager 0800 SBS Bank 51 Don Street, Invercargill

2 PO Box 835, Invercargill sbsbank.co.nz This email and any attachments may contain information which is legally privileged or confidential. If you have received this email in error, please notify the sender immediately and delete this email.

From: Sent: To: Cc: Subject: Follow Up Flag: Flag Status: Categories: Hi Shoko, Thursday, 31 March 2022 5:59 pm Shoko Seta Phil Nolan Rabobank New Zealand Limited (RNZL): BS8 Review Follow up Flagged Yellow category The team responsible for RNZL's connected exposure has reviewed the policy paper, and has confirmed that, given the nature of RNZL's connected exposure, the only proposed change set out in the policy paper that would impact RNZL is the proposed expansion of the definition of connected person. That said, we do not anticipate the impact of this change would be material to RNZL. By way of example - as of 31 December 2021, there would have been no change to either RNZL's credit exposure to connected persons, or to the number of connected persons, after applying the expanded definition (see table below). As a result, RNZL has not made a formal submission on the policy paper. As a general comment, RNZL does support the New Zealand Bankers' Association's suggestion within its submission of aligning the definition of connected person to the accounting standard definition of related party in NZ IAS 24 Related Party Disclosures. 31/12/2021 Current Definition Number of Credit exposure to connected connected persons Amount$m persons Credit exposure to connected persons (on partial bilateral net basis) 1.926 Thanks. Paul Cope Regulatory Affairs I Rabobank New Zealand level 4, 32 Hood Street Hamilton, New Zealand 3204 Phone Email: Web: www.rabobank.co.nz :­ Rabobanl< Expanded Definition Number of connected Amount$m persons 5 1.926 5 1