Regulatory Alerts2025-05-05
Updated Capital Review Implementation Timeline as at 6 May 2025
The Reserve Bank of New Zealand details the phased implementation of capital review measures affecting domestic systemically important banks through 2028. Key changes include the derecognition of non-qualifying AT1 and Tier 2 instruments, the introduction of dual reporting for IRB banks, and the gradual increase of the conservation buffer from 2.5% to 5.5%. The review of key capital settings is scheduled for completion by the end of 2025 to inform decisions impacting requirements from July 2026 onwards.
UNCLASSIFIED UNCLASSIFIED Updated Capital Review Implementation Timeline As at 6 May 2025 The table below details elements of the Capital Review that were implemented during 2021-2022: Completed on 31 March 2021 • Consultation on exposure drafts of revised Banking Supervision Handbook, including revised definition of capital instruments and framework for distribution restrictions and supervisory actions once a bank enters its prudential capital buffer. 17 June 2021 • Revised Banking Supervision Handbook published (Banking Prudential Requirement documents), along with our responses to submissions received. 1 October 2021 • New Banking Prudential Requirements came into effect, including new processes for the recognition of capital instruments. 1 January 2022 • Derecognition of non-qualifying AT1 and Tier 2 instruments began • Output floor on IRB exposures set at 85% • For IRB banks, Sovereign and Bank exposures move to Standardised approach 22 February 2022 • Consultation launched on IRB banks disclosing IRB and Standardised capital calculations (dual reporting) 2022 • Consultation on Standardised Measurement Approach for Operational Risk (H1 or Q3 2022) • Consultation on the operational framework for the countercyclical capital buffer (H1 2022) • Dual reporting comes into effect (Q3 2022) The phasing of the implementation of the increase in capital buffers and the IRB scalar is shown below: 1 July 20221 • D-SIB buffer set at 1% 1 October 2022 • IRB scalar increases from 1.06 to 1.2 1 July 2023 • D-SIB buffer increases from 1% to 2% 1 July 2024 • Minimum Tier 1 capital requirement increases from 6% to 7% • Minimum Total capital requirement increases from 8% to 9% 1 July 2025 • Conservation buffer increases from 2.5% to 3.5% The review of key capital settings will be completed by the end of 2025 and may include decisions that impact the capital buffer increases from 1 July 2026 onwards. 1 July 2026 • Conservation buffer increases from 3.5% to 4.5% 1 July 2027 • Conservation buffer increases from 4.5% to 5.5% 1 July 2028 • Countercyclical capital buffer set at 1.5% • Non-qualifying AT1 and Tier 2 instruments fully derecognised 1 Changes take effect from this date, meaning the 1% D-SIB buffer would be reflected in D-SIB banks’ reporting, e.g. on the RBNZ Dashboard, for 30 September 2022 (not 30 June 2022). This logic also applies to the IRB scalar and other capital ratio changes.