Her Excellency The Rt Hon Dame CINDY KIRO, gnzm, qso, Governor-General

Order in Council

At Wellington this 22nd day of November 2021

Present:

Her Excellency the Governor-General in Council

Pursuant to section 81 of the Reserve Bank of New Zealand Act 1989, Her Excellency the Governor-General, acting on the advice and with the consent of the Executive Council and on the advice of the Minister of Finance given in accordance with a recommendation of the Reserve Bank of New Zealand, makes the following Order.

Order

1. Title

This order is the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014 Amendment Order 2021 (No. 3).

2. Commencement

This order comes into force on 31 December 2021.

3. Principal Order Amended

This order amends the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014.

4. Interpretation

(1) This clause amends subclause 4(1).

(2) In the definitions of “Additional Tier 1 Capital”, “Common Equity Tier 1 capital”, “Tier 1 capital”, “Tier 2 capital”, and “Total capital” replace the definition with “has the same meaning as in BPR110: Capital Definitions.”

(3) Replace the definition of “affiliated insurance entity” with “affiliated insurance entity has the same meaning as in BPR160: Insurance, Securitisation and Loan Transfers”.

(4) Replace the definition of “affiliated insurance group” with “affiliated insurance group has the same meaning as in BPR160: Insurance, Securitisation and Loan Transfers”.

(5) Replace the definition of “BPR110: Capital Definitions” with “BPR110: Capital Definitions means the Reserve Bank document entitled “BPR110: Capital Definitions”.

(6) After the definition of “BPR001: Glossary” add “BPR100: Capital Adequacy means the Reserve Bank document entitled “BPR100: Capital Adequacy”.

(7) After the definition of “BPR110: Capital Definitions” insert the following four new definitions below:

“BPR130: Credit Risk RWAs Overview means the Reserve Bank document entitled “BPR130: Credit Risk RWAs Overview”;

“BPR133: IRB Credit Risk RWAs means the Reserve Bank document entitled “BPR133: IRB Credit Risk RWAs”;

“BPR140: Market Risk means the Reserve Bank document entitled “BPR140: Market Risk.”; and

“BPR160: Insurance, Securitisation and Loan Transfers means the Reserve Bank document entitled “BPR160: Insurance, Securitisation and Loan Transfers”.

(8) Repeal the definition of “buffer ratio”.

(9) Repeal the definitions of “Capital Adequacy Framework (Standardised Approach) (BS2A)” and “Capital Adequacy Framework (Internal Models Based Approach) (BS2B)”.

(10) Replace the definition of “Common Equity Tier 1 capital ratio” with “Common Equity Tier 1 capital ratio has the same meaning as in BPR100: Capital Adequacy”.

(11) Replace the definition of “EAD” with “EAD (“exposure at default”), for the purposes of calculating the risk-weight on a credit exposure subject to the IRB approach, means the value of EAD for that exposure determined under the applicable EAD methodology for the exposure specified in BPR 133: IRB Credit Risk RWAs”.

(12) Replace the definition of “equity” with “equity has the same meaning as “equity” given in “New Zealand Equivalent to the IASB Conceptual Framework Reporting” issued in 2018 (2018 NZ Conceptual Framework)”.

(13) Replace the definition of “holding company” with “holding company has the same meaning as in section 5 of the Companies Act 1993, except for the definition of “subsidiary” which has the meaning as defined in this Order.”

(14) Repeal the definition of “insurance business.”

(15) Replace the definition of “IRB approach” with “IRB approach means the internal ratings-based approach for modelling credit risk as provided for in BPR 100: Capital Adequacy.”

(16) Replace the definition of “LGD” with “LGD (“loss given default”), for the purpose of calculating the risk-weight on a credit exposure subject to the IRB approach, means the value of LGD for that exposure determined under the applicable LGD methodology for the exposure specified in BPR 133: IRB Credit Risk RWA.”

(17) In the definition of “past due” delete the words “NZ IFRS 7” and replaced with “NZ IFRS 9”.

(18) Replace the definition of “PD” with “PD (“probability of default”), for the purpose calculating the risk-weight on a credit exposure subject to the IRB approach, means the value of PD for that exposure determined under the applicable PD methodology for the exposure specified in BPR 133: IRB Credit Risk RWA”.

(19) After the definition of “premises” insert the following new definition: “prudential capital buffer ratio has the same meaning as in BPR 100: Capital Adequacy”.

(20) Replace the definition of “solo basis” with “solo basis, in relation to the calculation of a registered bank’s capital ratios, has the same meaning as in Subpart B2 of BPR100: Capital Adequacy”.

(21) In the definition of “subsidiary”:

1. replace “section 6(1)” with “section 5”; and
2. replace the words “Financial Markets Conduct Act 2013” with “Financial Reporting Act 2013.”

(22) In the definitions of “Tier 1 capital ratio” and “Total capital ratio”, replace the definition with “has the same meaning as in BPR 100: Capital Adequacy”.

(23) Replace “ultimate holding company” with “ultimate non-bank holding company”.

(24) In clause 2, insert a new subclause (2)(b) that states “if paragraph (a) does not apply, has the meaning given in BPR001: Glossary; or”.

(25) Replace old subclause (2)(b) with a new subclause (2)(c) that states “if neither paragraph (a) nor (b) applies, and if applicable, must be interpreted in a way that complies with generally accepted accounting practice”.

5. Clause 21 Amended

(1) In clause 21(1)(c):

1. delete “and is subject to a condition of registration requiring capital adequacy to be measured in accordance with Capital Adequacy Framework (Standardised Approach) (BS2A)”;
2. add “and” after “the information prescribed in Schedule 9;”.

(2) In clause 21(1)(d):

1. delete “fully” and “and is subject to a condition of registration requiring capital adequacy to be measured primarily in accordance with Capital Adequacy Framework (Internal Models) (BS2B)”;
2. delete “; and” after “the information prescribed in Schedule 11” and replace with a full stop.

(3) Repeal clause 21(1)(e).

(4) In clause 21(1)(2), delete “(e)” and replace with “(d)”.

6. Clause 22 Amended

(1) In clause 22(1)(c):

1. delete “and is subject to a condition of registration requiring capital adequacy to be measured in accordance with Capital Adequacy Framework (Standardised Approach) (BS2A)”; and
2. add “and” after “the information prescribed in Schedule 9;”.

(2) In clause 21(1)(d):

1. delete “fully” and “and is subject to a condition of registration requiring capital adequacy to be measured in accordance with Capital Adequacy Framework (Internal Models) (BS2B)”;
2. delete “; and” after “the information prescribed in Schedule 11” and replace with a full stop.

(3) Repeal clause 22(1)(e).

(4) In clause 22(1)(2), delete “(e)” and replace with “(d)”.

7. Clause 2 of Schedule 1 Amended

(1) In clause 2 of Schedule 1, insert “and” between subclause 2(1)(j) and subclause 2(1)(k).

(2) Delete “; and” at the end of subclause 2(1)(k)(ii) of Schedule 1 and add a full stop.

(3) Delete subclause 2(1)(l).

8. Clause 3 of Schedule 1 Amended

(1) In clause 3 of Schedule 1, insert “and” between subclause 3(c) and 3(d).

(2) Delete “; and”, at the end of subclause 3(d)(ii) of Schedule 1 and add a full stop.

(3) Delete subclause 3(e).

9. Clause 1 of Schedule 2 Amended

(1) Replace the title of clause 1 of Schedule 2 with “Details of ultimate parent bank and ultimate non-bank holding company”.

(2) Replace subclause 1(b) of Schedule 2 with “the name and address for service of the ultimate non-bank holding company of the registered bank; and”.

10. Clause 1 of Schedule 3 Amended

(1) Replace the title of clause 1 of Schedule 3 with “Details of ultimate parent bank and ultimate non-bank holding company”.

(2) Replace subclause 1(1) of Schedule 3 with:

“If since the balance date for the most recent full year disclosure statement there has been a change in either the ultimate parent bank or the ultimate non-bank holding company of the registered bank,—

1. A statement of the nature of the changes;
2. The name and address for service of the ultimate parent bank; and
3. The name and address for service of the ultimate non-bank holding company.”

11. Clause 2 of Schedule 7 Amended

(1) Replace subclause 2(a) of Schedule 7 with:

“(a) if the registered bank has not been accredited by the Reserve Bank to use the internal models based approach to capital adequacy, the following:

1. residential mortgage loans;
2. on balance corporate exposures; and
3. on balance sheet exposures excluding those referred to by subparagraphs (i) and (ii) and excluding exposures to sovereigns and central banks, multilateral development banks and other international organisations, public sector entities, and banks; and
4. total credit exposures;”.

(2) Replace subclause 2(b) of Schedule 7 with:

“(b) if the registered bank has been accredited by the Reserve Bank to use the internal models based approach to capital adequacy, the following:

1. exposures secured by residential mortgages;
2. retail exposures as defined in BPR133: IRB Credit Risk RWAs excluding those referred to by subparagraph (i); and
3. corporate exposures as defined in BPR 133: IRB Credit Risk RWAs; and
4. total credit exposures.”.

(3) Repeal subclause 2(c) of Schedule 7.

12. Clause 3 of Schedule 9 Amended

In the tables referred to in subclause 3(2) of Schedule 9—

1. In the section of the first table labelled “Residential mortgages not past due”, in the third column with the sub-heading “Risk weight”—
1. insert a row for 40% between the rows for 35% and 50%;
2. insert a row for 70% between the rows for 50% and 75%; and
3. add rows for 80%, 90% and 100% after the row for 75%.
2. In the section of the first table labelled “Past due residential mortgages”, in the third column with the sub-heading “Risk weight”, insert rows for 35%, 40%, 50% and 75% before the row for 100%.
3. In the eleventh row in the first column of the first table, replace the label with “Equity holdings (not deducted from capital) included in the NZX 50 or overseas equivalent index”.
4. Replace the subsection of the second table in subclause 3(2) of Schedule 9 under the heading “Market related contracts” with the following new table:

Counterparty credit risk

13. Clause 9 of Schedule 9 Amended

Delete subclause (9)(1)(a) of Schedule 9 and replace it with “BPR 140: Market Risk”.

14. Clause 11 of Schedule 9 Amended

(1) In the second table referred to in subclause 11(2) of Schedule 9, replace the heading with “Prudential capital buffer ratio”.

(2) In the first row of the second table, amend the sub-heading to “Prudential capital buffer ratio”.

(3) In the second row of the second table, amend the sub-heading to “Buffer trigger ratio”.

15. Clause 12 of Schedule 9 Amended

Replace subclause 12(1) of Schedule 9 (including its subclauses 12(1)(a) and (b)) with a new subclause 12(1) “The information in subclause (2) in respect of the registered bank”.

16. Clause 3 of Schedule 11 Amended

(1) Replace subclause 3(4) of Schedule 11 with:

“(4) For each exposure class the following information as at the reporting date:

1. total value of undrawn commitments and other off-balance sheet contingent liabilities;
2. the total counterparty credit risk on derivatives and securities financing transactions;
3. the EAD of undrawn commitments and other off-balance sheet contingent liabilities; and
4. the EAD of counterparty credit risk on derivatives and securities financing transactions”.

(2) Replace subclause 3(5) of Schedule 11 with:

“(5) For the purpose of the disclosure required by subclauses (2) and (4) the exposure classes to be disclosed are those defined in BPR133: IRB Credit Risk RWAs except that the retail exposure class must be disclosed as if the following two exposure sub-classes of the retail exposure class were each a separate exposure class:

1. exposures secured by residential mortgages; and
2. all other retail lending.”

17. Clause 5 of Schedule 11 Amended

Replace subclause 5(1) of Schedule 11 with “If the slotting approach for specialised lending exposures as defined in BPR133: Credit Risk RWAs is used, the information in subclause (2) in respect of the registered bank’s banking group.”

18. Clause 6 of Schedule 11 Amended

In the second table referred to in subclause 6(2) of Schedule 11, replace the subsection of the table under the heading “Market related contracts subject to the standardised approach” with the following new table:

Counterparty credit risk for counterparties subject to the standardised approach

19. Clause 8 of Schedule 11 Amended

In the table referred to in subclause 8(2) of Schedule 11, “Equity exposures”, replace the text in the second row, first column, with:

“Equity holdings (not deducted from capital) included in the NZX 50 or overseas equivalent index”.

20. Clause 9 of Schedule 11 Amended

Replace subclause 9(1) with:

“For the purpose of the disclosure required by this Schedule, risk-weighted on- and off-balance sheet credit exposures and capital requirements must be the amounts after multiplying by the scalar (if any) specified in BPR130: Credit Risk RWAs Overview, as applicable to different classes of exposure.”

21. Clause 13 of Schedule 11 Amended

In subclause 13(1)(a) of Schedule 11, replace “Capital Adequacy Framework (Internal Models Based Approach)(BS2B)” with “BPR140: Market Risk”.

22. Clause 15 of Schedule 11 Amended

(1) In the second table referred to in subclause 15(2) of Schedule 11, replace the heading with “Prudential capital buffer ratio”.

(2) In the first row of the second table, first column, amend to “Prudential capital buffer ratio”.

(3) In the second row of the second table, first column, amend to “Buffer trigger ratio”.

23. Clause 4 of Schedule 17 Amended

In subclause 4(b) of Schedule 17, replace “or ultimate holding company” with “or ultimate non-bank holding company”.

24. Clause 8 of Schedule 17 Amended

(1) In clause 8 of Schedule 17, delete subclause 1.

(2) Delete (2) at the start of the former subclause 8(2) of Schedule 17.

(3) Replace former subclause 8(2) with:

“If a registered bank has been accredited by the Reserve Bank to use the IRB approach to credit risk, information giving a broad overview of the model approaches and methods used for the estimation of Probability of Default and, if relevant, Loss Given Default and Exposure at Default, for the following exposure classes or sub-classes as defined in BPR133: IRB Credit Risk RWAs:

1. any exposure class other than the retail exposure class which includes exposures of a material total value;
2. exposures classified as retail mortgage lending by the registered bank for the purpose of internal credit risk modelling; and
3. retail exposures other than those referred to in paragraph (b).”

25. Clause 10 of Schedule 17 Amended

Replace clause 10 with:

“If the registered bank has been accredited by the Reserve Bank to use the IRB approach to credit risk, a discussion of the control mechanisms for the rating systems used to measure credit risk, covering independence, accountability and rating systems reviews.”

Dated this 2nd day of February 2022.

RACHEL HAYWARD, for Clerk of Executive Council.

Explanatory Note

This note is not part of the order, but is intended to indicate its general effect.

This order comes into force on 31 December 2021. It amends the Registered Bank Disclosure Statements (New Zealand Incorporated Registered Banks) Order 2014, published in a Supplement to the New Zealand Gazette, 21 February 2014, No. 21, page 452. The purpose of this order is to update disclosure requirements for New Zealand incorporated registered banks to align with the new Banking Prudential Requirement (BPR) documents that set out the capital adequacy requirements for New Zealand incorporated banks. The order also removes some redundant material.

Note: This notice replaces the one published in the New Zealand Gazette, 30 November 2021, Notice No. 2021-sl5170, which was published in error.

This order is administered by the Reserve Bank of New Zealand.