RBNZ considers easing bank disclosure, loosens finance company rules

See also: Reserve Bank considers requiring fewer bank reports

The Reserve Bank is looking at ways to lower regulatory costs for private lenders by scaling back their disclosure obligations and plans to raise the threshold at which finance companies have to get a credit rating, following a year-long review of its prudential rules.

Head of supervision Toby Fiennes told the Bankers' Association in Auckland the regulator has been reviewing its oversight framework for banks and non-bank deposit takers (NBDTs), and today launched a consultation document relating to rules governing banks. After a decade of significant changes to prudential requirements, the RBNZ launched a stocktake last year to check whether they were fit for purpose.

"We want to ensure that the prudential regime does not unnecessarily undermine dynamic, allocative and productive efficiency in the market, and the scope for innovation," Fiennes said in speech notes published on the RBNZ's website. "In practice, this means ensuring that it does not impose unnecessary costs or restrictions on banks and NBDTs, while still achieving its core financial stability objectives."

The central bank is looking at whether banks should be required to prepare first and third quarter, or "off-quarter" disclosure statements, which lenders say creates financial and opportunity costs. The RBNZ hasn't formed a preferred view, but is considering whether to retain the status quo, or to drop the requirements on banks with retail deposits below $200 million, replacing it with a different form of disclosure, or dropping the requirement altogether.

The RBNZ is also looking at restructuring the Banking Supervision Handbook, review some of its capital requirements, improve transparency in its own policy making processes, and analyse the way it defines regulatory requirements across different banks.

The bank's prudential oversight was expanded to finance companies after the global credit crunch of the late 2000s and the fallout from the intermingled affairs of multiple local mezzanine lenders, which saw 45 finance companies collapse between 2006 and 2011, and plans to amend some of its requirements after working with three industry bodies last year.

That includes a plan to lift the credit rating exemption threshold to $40 million from the current level of $20 million, while requiring entities with less than $20 million to maintain a minimum capital ratio of 10 percent. Those holding between $20 million and $40 million will need a ratio of 12 percent.

The RBNZ will review capital requirements for NBDTs in the first half of 2015 and will look at how it categorises credit unions' deposits for liquidity purposes later this year.

The central bank won't carry out any extra work on related party exposure limits, which were raised by stakeholders.

Submissions on the banking consultation document are open until Sept. 16.

(BusinessDesk)