Changes follow a notification by the Australian Prudential Regulation Authority
Australia and New Zealand Banking (ANZ) has announced new risk weight floors on its New Zealand mortgage and farm lending portfolios.
In a press release, ANZ Bank said that the changes reduced 20 basis points from the bank’s Level 2 Common Equity Tier 1 (CET1) capital ratio.
As of 30 June 2019, ANZ’s Level 2 CET1 capital ratio was 11.8%, still in excess of APRA’s requirement of only 10.5%.
The changes followed “notification” by the Australian Prudential Regulation Authority (APRA) in response to an increase weight applied by the Reserve Bank of New Zealand (RBNZ) for the portfolios. Risk-weighted assets determine the minimum amount that must be held by banks to reduce risk in case of a major financial shock.
Read more: ANZ and Westpac credit ratings downgraded
In February, RBNZ said that ANZ needed only slightly more than half the capital that Kiwibank needs to back each $100 of mortgage lending.
In May, RBNZ required ANZ to use the standardised model to calculate operational risk capital because it had been using an unapproved model since December 2014.
This month, Australia’s top lenders announced that they would have to either reduce their businesses in New Zealand or sell them off entirely if the country continues to increase the amount of capital that banks must hold.
RBNZ proposed lifting the minimum tier 1 common equity from 8.5% of risk-weighted capital to 16% for the four Australian-owned banks and to 15% for other banks.
