Requirements for domestic systemically important banks

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Standards and requirements for banks

Our framework for identifying domestic systematically important banks (D-SIBs) and the capital requirements for these banks.

Published:

The framework for identifying D-SIBs

We consulted on a framework for identifying domestic systematically important banks (D-SIBs) in 2019. We published our response to the submitters’ feedback and our preferred methodology for identifying D-SIBs in August 2019.

A framework for identifying D-SIBs consultation

We can confirm that we will give equal weighting to all 4 dimensions that we consider when determining the importance score, that is size, interconnectedness, substitutability and complexity.

The D-SIB scores are indicative and we have decided not to have a pre-set threshold above which a bank is automatically identified as a D-SIB. Instead, we will base our decisions on our supervisory knowledge to determine the list of D-SIBs.

Why some banks are identified as D-SIBs

New Zealand has a highly concentrated banking system with almost 90% of the total banking system assets owned by the 4 main banks (ANZ, BNZ, ASB and Westpac).

The failure of any of these 4 banks is likely to result in significant disruption to the New Zealand financial system and economy. For this reason we decided additional loss-absorbency requirements, in the form of additional CET1 capital, should be required for banks identified as D-SIBs.

More information

A framework for identifying D-SIBs consultation

Review of the capital adequacy framework for registered banks

The buffer ratio requirement for D-SIBs

We also consulted in 2019 on additional capital buffer requirements for D-SIBs and later that year identified that these banks would need an additional buffer as part of the capital adequacy framework.

D-SIBs must have a buffer ratio requirement of 2% of their total risk-weighted assets. This ratio needs to be met with common equity capital.

We are phasing in the requirement, with the first 1% due to take effect on 1 July 2022, and the second 1% on 1 July 2023.

Which banks are identified as D-SIBs

We have identified the following banks as D-SIBs:

ANZ New Zealand Limited

Bank of New Zealand

ASB Bank Limited

Westpac New Zealand Limited.

We will update this list if there is a change. When a bank is added to the list, we will agree the length of any transition period before the bank is subject to the full D-SIB buffer ratio.