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UPDATE 1-ANZ posts new risk weight floors for NZ mortgage, farm lending portfolios

Published 29/07/2019, 09:47 am
UPDATE 1-ANZ posts new risk weight floors for NZ mortgage, farm lending portfolios
PRU
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ANZ
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(Adds current capital ratio position, background on RBNZ capital requirements, details)

July 29 (Reuters) - Australia and New Zealand Banking ANZ.AX on Monday announced new risk weight floors on its New Zealand mortgage and farm lending portfolios, resulting in lower capital ratio for the group and its banking units.

ANZ said in a statement that the changes would cause a 20-basis-point reduction in the bank's level 2 Common Equity Tier 1 (CET1) capital ratio. The bank said the changes followed "notification" by the Australian Prudential (LON:PRU) Regulation Authority.

The changes were in response to an increase in risk weights applied by the Reserve Bank of New Zealand for these portfolios. Risk-weighted assets are used to determine the minimum amount of capital that must be held by banks and other institutions to reduce risk in case of a major financial shock.

New Zealand's central bank in May said it revoked ANZ's local licence to calculate its own operational risk capital due to "persistent" control failures, adding to the bank's minimum capital requirement in the country.

Australia's top lenders had earlier this month said they would have to reduce their businesses in New Zealand or look at selling them off entirely if the country pushes ahead with plans to increase the amount of capital banks must hold.

ANZ said there would be no changes to its level 1 capital ratio, which excludes subsidiaries, and that the higher risk weights for New Zealand were included in the level 1 ratio as at 31 March 2019.

As of the June 30 2019, ANZ's Level 2 CET1 capital ratio was 11.8%, in excess of APRA's requirement of 10.5%, the bank said. Level 2 refers to reporting for the group and its banking subsidiaries.

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