Regulatory Alerts2022-05-17
Changes to BS2A and BS2B regarding the definition and capital treatment of residential mortgage loans
The Reserve Bank of New Zealand amends BS2A and BS2B to refine the definition of residential mortgage loans and introduce sub-classifications for standard and reverse loans effective July 2016. The regulatory framework now distinguishes between non-property-investment and property-investment loans, establishing specific risk weights, loss given default calibrations, and loan-to-value ratio calculation methods for each category. Additionally, the rules mandate three-yearly property value updates for reverse mortgages and specify capital deductions for loan amounts exceeding the security value.
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