NZ banks could face $21bn capital shortfall
The Swiss banking giant has revised its estimate for how the RBNZ capital rules will hit the country's major lenders. Previously, UBS warned New Zealand banks would face a $15 billion shortfall.
UBS now believes there is "limited capacity" for banks to utilise perpetual non-redeemable preference shares for their capital reserves. It says banks will also want to keep a buffer of 1% on top of the minimum requirements. These factors, according to UBS, mean the big four face a bigger shortfall than previously expected.
Under the Reserve Bank proposals, currently under consultation, the big four would be forced to boost capital ratios from 12% to 16% over the next five years, representing an extra $20 billion in combined reserves. Smaller banks would have to increase their capital ratios from 14%-15%, increasing their combined capital by 0.9%.
Critics warn the capital proposals, introduced by governor Adrian Orr (pictured), will lead to more expensive borrowing rates for Kiwis. The RBNZ says they will only have a "minor" impact on borrowing rates.
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