New Zealand cenbank adds new capital rule to contain risk

WELLINGTON Mon Dec 10, 2012 9:37pm EST

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WELLINGTON Dec 11 (Reuters) - The Reserve Bank of New Zealand (RBNZ) said on Tuesday it has added a new counter-cyclical capital buffer that can be applied in times of excessive capital growth from 2014 as it released final capital adequacy standards for banks under international Basel III rules.

The RBNZ said the bulk of the new standards will take effect from Jan. 1, 2013, such as rules around how much regulatory capital must be held by banks, and which financial instruments may be treated as regulatory capital.

The central bank had already confirmed in May that it would increase banks' core funding ratio to 75 percent from 70 percent as part of measures to strengthen banks' liquidity.

The Basel III capital framework was introduced by the Basel Committee on Banking Supervision (BCBS) in December 2010 to raise the quality and level of capital in the banking system.

"The final capital adequacy requirements released today considerably enhance the ability of the New Zealand banking system to absorb shocks, whatever their source," Deputy Governor Grant Spencer said in a statement.

He said New Zealand banks were already well capitalised, making it easier for the country to implement the Basel package.

The RBNZ said two parts of the Basel framework are still to be finalised, including counterparty credit risk and disclosure requirements.

There are 19 registered banks in New Zealand, although the sector is dominated by four Australian-owned entities - ANZ Bank , Bank of NZ, ASB Bank, and Westpac . (Reporting by Mantik Kusjanto; Editing by Jacqueline Wong)

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