The Co-operative Bank has welcomed the Reserve Bank of New Zealand’s final decisions on its review of bank capital requirements, saying the changes will help strengthen competition across the sector.
Chief executive Mark Wilkshire said the updated settings strike a more appropriate balance between financial stability and efficiency, while better recognising the position of smaller domestic banks.
Wilkshire said the Reserve Bank had responded to feedback from local lenders by adjusting capital rules to better reflect underlying risk.
He said: “We are pleased to see the Reserve Bank respond to feedback from domestic banks by adjusting capital settings to reflect the risk levels and introducing more granular risk weights, which results in lower capital requirements.
“These changes will ease some of the constraints that have limited growth for smaller banks and will help us deliver more choice and better value for customers.”
Under the final framework, the Reserve Bank will apply lower minimum capital ratios for all deposit takers than under the previous settings.
The revised approach also removes the use of Additional Tier 1 instruments, simplifying banks’ capital structures, and introduces more risk-sensitive standardised risk weights.
These include lower capital requirements for low loan-to-value ratio mortgage lending, which Wilkshire said better aligns capital with actual risk.
The final decisions also confirm that domestic banks will not be subject to a Loss Absorbing Capacity requirement, avoiding additional cost and operational complexity.
Wilkshire said this element of the review was particularly important for smaller lenders competing with the major banks.
He said the overall outcome would support a more competitive banking system without undermining resilience, adding that the changes should ultimately benefit customers through improved choice, pricing and access to credit.