This after a consultation on two possible options from March to June
The Reserve Bank of New Zealand has decided to proceed with Mutual Equity 1 (MET1) as its preferred capital instrument for mutual banks, following feedback from the industry.
In December 2019, RBNZ published the final decisions from the Capital Review, which include requiring banks to have larger buffers of Common Equity Tier 1 (CET1) capital, to mitigate the risk of negative economic and social costs associated with bank failure in New Zealand.
To address the unresolved issue of coming up with a capital instrument for mutual banks that would qualify as a CET1 capital, RBNZ consulted two possible options for a mutual capital instrument from March to June.
“The MET1 capital instrument will provide mutually owned banks with more flexibility for raising capital and will support our financial stability objectives by aligning shareholders’ financial interests with the performance of the bank,” said Kate Le Quesne, director of prudential policy. “This option balances our policy objective of providing mutual banks with another avenue to raise CET1 capital, with our overarching financial stability objectives.”
RBNZ has now published an exposure draft of the amended Banking Prudential Regulations for further feedback. Submissions are welcome until March 31, 2023. The bank also released a document detailing its response to submissions as well as a regulatory impact assessment that details its policy process and analysis behind the decision.
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