Regulatory Alerts2022-05-17
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Capital review - Next steps for the definition of capital
The Financial Policy division of the Reserve Bank of New Zealand recommends further work on refining the regulatory capital definition following the closure of the Numerator Paper consultation. The analysis highlights a preference for removing contingent capital instruments and considers a new Option 6 that limits qualifying capital to common equity, potentially including specific instruments for mutual societies. This direction aims to address concerns about loss-absorbing effectiveness and market depth while acknowledging the limited issuance of bespoke instruments by major banks.
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