Submissions on RBNZ Capital Ration Proposals

Patrick Dempsey
Great initiative. It is unfair and fundamentally wrong that profits are privatised and losses are socialised. Banks that are too big to fail should have additional risk mitigation relative to banks that wouldn't get bailed out. OIA s9(2)(a)

Patrick Kerr
It is essential the capital held by banks is increased. The current high valuations applied to NZ property is at historic levels. These will not and in fact can not be maintained. Banks must accept responsibility for the risk they take. Current levels of bank capital requirements are far too low and provide little comfort to NZ. When values fall the net effect of current capital requirements will place the banking industry in jeopardy and as has happened in previous crashes the public will be required to bail them out. No risk = no reward. OIA s9(2)(a)

Paul Carman
Dear Sirs
I'm an expat New Zealander who for the last 30 years has been working in one of the GSIFs in London and New York. I have until recently been a Senior Manager under the UK FCA and PRA regulatory environment and have been running the leveraged finance and private equity related business in that bank son r 2010 I feel the proposed changes are important given the Basle 3 and 4 Global context but am also concerned that the impact on NZ with out high relative level of SMEs and self employed which might imply lower credit ratings and higher capital costs and thereby higher borrowing charges could be challenging. As such I'm returning to NZ this year with a plan to start up a fund related alternative lending platform and would be keen to share some thoughts with you and am wondering who I would be best placed to liaise with in the first instance to understand RNBZs stance more clearly. Wondering it despite this rather broad route into you if it would be possible to start a more specific dialogue? Regards Paul Carman

Paul David Martin
To Mr Grant Robertson,
Mid last year at a breakfast meeting held at the Classic Flyers in Tauranga I brought up the question of either Government back insure bank depositors cash of say $50-$75k or increase the capital of the key banks in NZ because of our small size and the impact upon NZ and its economy should another recession eventuate as in 2007. There are many small countries where this is being done.Please see attached the actions taken by another small country exposed and sensitive to future economic shocks Denmark. We can do the same and I support the actions of the Coalition to implement this initiative. Thank you for reviewing my submission. Sincerely Paul Martin OIA s9(2)(a) OIA s9(2)(a)

Peter Hein Garrick
I support the RBNZ's intent to increase the capital required to be held by Bank's in NZ. Please pursue this to increase capital adequacy. In the 2008 crisis it became clear overseas how vulnerable Banks were as a result of the low levels of shareholder capital. And as credit only ever seems to grow increasing capital adequacy is important in my opinion. Depositors need to feel safe and needing the Government to guarantee deposits is not appropriate, especially when most years Banks are making very good profits i.e. I don't believe 'privatising profits but socialising risks' has integrity. Therefore Banks need to be stronger, and therefore I support the RBNZ's proposals to increase the amount of capital that Banks need. The Banks levels of profitability and in particular ROE ratios are strong and so now in the better times I support the RBNZ to act to increase capital adequacy ratios to allow Banks to better weather the times of financial stress independently, without depositors needing to share in the risks. Thanks, peter... OIA s9(2)(a)

Peter Lomas
I support the Reserve Bank’s proposal to increase the trading banks Reserve Capital requirements to the maximum extent possible for the following reasons. Shortly after the financial collapse in 2008 newly elected Prime Minister John Key went on television and said he had met with all four heads of the Australian banks and had been assured by them that they were all sound and none of them had required a bail out from the US Federal Reserve. However a couple of years later US Senator Ron Paul succeeded in getting a partial audit of the US Federal Reserve and one of the results of this was that it was discovered that two of the Australian Banks did indeed receive bail-outs in 2008. Westpac received about 300 million and the BNZ about 1.2 billion. Thus my reason for supporting the Reserve Banks requirement to increase the Capital Requirement for the four Australian banks in particular are
1) The four Australian banks have a history of lying and can’t be trusted
2) Our politicians are at best gullible and when push comes to shove are little more than
pimps for these four banks.
3) We all know the next financial crises is on the horizon.
OIA s9(2)(a)

Peter Robinson
At this present time banks current capital requirements are well below other countries, it is of utter importance that an increase is required for the stability of New Zealand. Banks have the advantage of the Open Bank Resolution, out of 34 countries in the O.E.C.D New Zealand, along with Israel are the only countries without some form of deposit protection mechanism. insurance. Should there be an unlikely event such as a bank failure occur, the banks have the assurance of the O.B.R. debt levels are at present above the figures of 2007, I feel it is imperative capital requirements are increased to a level that projects confidence within the economy, along with the public sector. . OIA s9(2)(a)

Peter Stickings
Submission doc attached
OIA s9(2)(a)

Date: 17 May 2019
Submission to: Reserve Bank of New Zealand, Wellington From: Peter Stickings , Christchurch Consultation Regarding RBNZs plans re increasing NZ Banks Capital Holding requirements As a Kiwi I support the RBNZs view that New Zealand Banks need to hold significant capital to withstand potential future market shocks and possible banking failures. New Zealand is also well out of step with international situation where a deposit insurance scheme operates to protect retail investor’s deposits in banks. That said, I strongly object to the likely situation where deposit insurance costs and increased capital holdings requirements will be passed on to be paid for entirely by depositors. This will likely result in hard working Kiwis getting even lower return on savings than the current very low returns available. Key issues that these plans throw up include:

• Low deposit rates will provide little incentive to save in NZ banks, adding additional
  costs that result in even lower rates will be not well received by savers
• Capital from bank deposits will flow into the already significantly over-valued and
  stressed housing market via NZ’s favoured investment “property”
• Increased Capital holding requirements will be particularly hard on smaller local
  banks such as Heartland Bank and Coop Bank who will struggle to provide this capital, this will favour further mega profitable Aussie Banks who control most of the NZ banking market. There is the potential these small banks will be taken over by the Aussies or fail
• More capital will likely flow to Australia market and banks as NZ will be less
  attractive to local investors and savers
• Last week RBNZ Governor Orr cuts the OCR to 1.5% and is now telling Kiwis we
  should invest away from NZ banks; however there is little real opportunity for savers and investors in NZ beyond property. The NZ sharemarket (NZX) is a minnow and shrinking and offers little investment upside to small kiwi “ma and pa investors”. Just this week the planned Vodafone NZ IPO was cancelled as a private equity firms takeover removed this investor opportunities, other examples of the NZX investor issues include:
  o Restaurant Brands delisted from NZX after takeover by UK investment house o Trademe taken over by UK investors and delisted o Zero moved from NZX to ASX 12 months ago due to NZX viability OIA s9(2)(a)

o No IPO or new listings on NZX in recent period o NZX favours large investors and funds; the small investor has no access to live market data and is always on the unfavourable end of any market moves and negative news as we get the information too late! o IRD and ATO need to sort out ASX imputation credits and Trans-Tasman cross market taxation issues need to be sorted out, to fairly treat the NZ saver and investor My view is the RBNZ also needs to more favourably consider how fairly Kiwi Savers are being treated in an ever downward NZ interest rate environment. Encouraging spending is not the answer, many Kiwis are providing the capital that back the banks and the signals RBNZ is sending us is not incenting saving that is the bedrock of banking! The NZ market dominant mega profit making Aussie banks are the most profitable in the world. The costs and decreased rate of return and profits from any increased capital holding requirements, and proposed depositor insurance scheme should be covered by their Australian parents Co’s through a small level of lower shareholders dividends, and not funded by decreased Kiwi depositor interest rates.

Bank, capital review
Hello
I am not sufficiently knowledgeable to offer a technical response to the proposed strengthening of Banks' capital requirements. However, as a superannuitant, dependent on relatively modest savings, I am totally supportive of the suggested changes. Regards Peter Thomson

From: Ren Blair
Sent: Tuesday, 4 June 2019 1:21 PM
To:
Subject: Govenor Adrian Orr

Tena korua,

I know I haven't been able to connect with you gents recently.

Could you send a personal message to Adrian to say KIA KAHA Stand Strong - I personally believe the Capital Review is very good and the stance taken with ANZ is a bloody good one.

I don't have Adrian's phone number otherwise I would send him a personal message directly.

The banks' social license to operate has been eroding with the public and the NAB and ANZ positions have been examples of untenable situations. I am personally glad the RB has taken a proactive position with ANZ. The RB action will give confidence to the public that seeks to ensure the likes of ANZ are operating in a sound, stable and efficient way. Kia Kaha koutou.

NB - I also believe the Chair and CEO of ANZ should be forced to resign - but that is another matter.

Renata Blair

Hi folks - my thoughts on new capital requirements........
I support the proposed stronger bank capital requirements by the RBNZ and congratulate them for addressing it - my views are based on my understanding as follows:

1. BIS rules say Tier 1 capital should be @8% - yet most NZ/Aust banks operate @10-12%
   (but that may include some dubious tier 2 debt?)
2. To jump to 16% tier 1 seems quiet a challenge - maybe if RBNZ required 12% tier 1 then
   banks may increase their buffer to @16%…..- but to go to 16% means maybe they may buffer to 20% which is quite high??
3. To refute the avarice banks comments that 16% is excessive capital required - maybe
   point out to them that they want us as consumers to have 20% equity for a house loan and 35-50% equity for business/commercial loan …….so why should they operate at just 8%??
4. Also educate people that banks rely on confidence and continuity - that is because they
   fund @90% of their lending form 6 mths retail deposits (@75%) and 1 to 5yr wholesale funding (@20%) ………and then they lend to complete strangers for 30yrs?/. That is a massive mismatch risk so higher capital requirements is sensible.
5. In response to fears of higher equity costs increasing the cost of funds to
   consumers/borrowers - I would suggest that higher equity levels should actually decrease the cost of funds as there is less risk to investors if there is more equity - to achieve this higher equity they can reduce dividends rather than necessary the need to raise more equity over a 5yr period
6. NZ banks take too much profit off the table as they are one of the highest ROE in the
   OECD (followed by Australia) as they have a strong oligopoly - increasing capital requirements should reduce their ROE which should be @10% over the risk rate
7. Please check product pricing between Australia and NZ and you will find NZ consumers
   pay higher prices in most products - Australia say NZ has a higher risk premium but thats just a way of stripping more dividend from NZ
8. I believe ask 3 questions of NZ banks - what's your ROE compare to OECD?, how much
   tax are you paying? and what are your service levels? - we are the worst at most - just try calling a call centre or try to speak to an ever decreasing number of bank personal
9. Risk weighted assets levels is a problem in NZ with housing at @35% and
   business/commercial/development loans at 100% - hence housing gets the most lending as it provides a greater ROE - if you don’t own property it is hard to get a loan Just One Man’s Opinion! Richard Trounson (34yrs in banking and financial markets in NZ)

Richard wilson
Would an investor not shift their capital to the highest return?
Less return on a bank shareholding will result in less money available for nz businesses. To be in business for the long term you have to last through the short term . As a dairy farmer I was afraid the government and its appointed people would make good on their ambition to bring new Zealand's dairy down. High interest rates, environmental taxes and the very real possibility of a cpt . I am not in favour of the large increase of the banks capital requirement. OIA s9(2)(a)

Rob Benden
I am rather concerned at what is looking far more like an over reaction, rather than prudence. Our banks are already at the top of the global list with regard to capital requirement. The proposal will put them in first place by a very large margin from what I understand. It is right to be cautious, and strong capital requirement is a good thing.But this move will have a massive effect, particularly in the rural sector. Considering our economy is heavily reliant on agricultural exports we surely need to exercise caution. It would be my preference to not make any changes to the capital requirements. OIA s9(2)(a)

Rob Morris
Dear Governor,
We are trapped in a never ending quest for economic growth for the reason that the alternatives are untenable. That growth has been funded by debt which has increased the volatility particularly on the downside. Most do not understand the risk attached to money in the bank nor can all be expected to have knowledge on such a specialist area. For the above reasons the Reserve bank of NZ is prudent to increase the capital adequacy ratios of the main banks. I believe it is also important for NZ to have a deposit insurance scheme as the chaos ensuing from any rumours of difficulty or default may be catastrophic. Thank you for the opportunity to submit my opinion. Sincerely, Rob. OIA s9(2)(a)

Robert Heywood
I fully support the proposal to increase the N.Z. Bank capital requirements to the level proposed in Reserve Bank's Consultation Paper on the amount of regulatory capital required of locally incorporated Banks. The proposals are particularly relevant in light of the fact that New Zealand does not have a Deposit Guarantee arrangement, as in other major Western economies, such as Australia, U.S.A., and the U.K. Conservative investors use the major N.Z. Banks as their primary vehicle for savings and capital preservation. Further, many retirees depend on the interest earned on their Bank Deposits to supplement their Superannuation or Pension pay-outs to maintain a satisfactory standard of living. The consequences of a major N.Z. Bank failure would be catastrophic for this vulnerable sector of society. Turning to the bigger picture, there has been a disturbing increase in personal debt over recent years and whilst the present low interest rate setting has enabled this situation to be sustained, it leaves leveraged businesses and personal borrowers highly vulnerable to any economic downturn or credit event which would expose the Banks to an unacceptable level of risk with the present minimal capital settings. We are experiencing an unprecedented global economic backdrop with many disturbing monetary and fiscal experiments yet to be normalised. These factors in a troubled global political & trade environment make a prudent capital setting for our major Banks imperative. Implementation should be progressed in a prompt and timely manner. OIA s9(2)(a)

Ron Rosenberg
In addition to the banks being required to raise their capital requirement the Government should guarantee Term Deposits in the event that a Bank fails and is unable to totally cover Term Deposit investments. Term Deposits currently rank as unsecured yet form a substantial percentage of a banks loan portfolio. Term deposits shoul not be the last in the line as security rating and should be secured in the same way as any other Bank borrowing. The failure of Banks to repay Term Deposits in the event of failure will have huge financial consequences particularly in the elderly group where their only or major source of income outside of Super is Tem deposits. OIA s9(2)(a)