2019.12.0503:37:00UTC+00RBNZ Raises Capital Requirements To Ensure Safety

Reserve Bank of New Zealand on Thursday decided to increase the capital requirements of banks to make the banking system safer.

The change in the capital framework will be implemented over seven years, which will give plenty of time for banks to manage a smooth transition and minimize adjustment costs, Governor Adrian Orr said.

Also, more capital in the banking system better enables banks to weather economic volatility and maintain good, long-term, customer outcomes, he added. More capital reduced the likelihood of a bank failure.

The key decisions include banks' total capital increasing from a minimum of 10.5 percent to 18 percent for the four large banks and 16 percent for the remaining smaller banks.

The average level of capital for banks currently is 14.1 percent.