The Reserve Bank Building in central Wellington. Photo / Mark Mitchell
The Reserve Bank Building in central Wellington. Photo / Mark Mitchell
The Reserve Bank has created a new public register documenting episodes of "material" breaches by banks of the rules under which lenders are regulated.
The register would "aid transparency of compliance with key bank prudential requirements", the central bank said.
Under the terms of banks registration, each institution is requiredto report any breaches of the rules regarding capital levels, liquidity management and corporate governance to the Reserve Bank.
"The publication of the register collates material breaches from the banks we regulate in one place and aligns with our aim to be an open, transparent regulator," Christian Hawkesby, a deputy governor and general manager of financial stability at the Reserve Bank, said in a statement.
Three banks - Southland Building Society (SBS Bank), Westpac New Zealand and Kiwibank - were immediately added to the register, for material breaches identified since the start of January 2021.
Reserve Bank deputy governor Christian Hawkesby. Photo / supplied
All three breaches related to liquidity requirements, although the Reserve Bank said all of the banks currently on the register "were compliant with the Reserve Bank's liquidity and capital requirements as at 31 December 2021".
In the case of both Kiwibank and Westpac, the issue related to the calculation of liquidity under the liquidity policies developed by the Reserve Bank after the global financial crisis.
Individually, the breaches by Westpac and Kiwibank did not constitute material breaches of the conditions of registration, however, in both cases, the Reserve Bank said it took a "holistic assessment" and concluded that the number of instances viewed collectively amounted to a material breach.
In the case of SBS Bank, the Reserve Bank said the Invercargill-headquartered bank "incorrectly classified funding drawn via a warehouse facility as core funding" between January and August 2021.
"The root cause of the non-compliance was SBS Bank's failure to maintain appropriate controls to monitor changes to the terms of its warehouse facilities," the Reserve Bank said, adding however that "at all times SBS Bank's [core funding ratio] comfortably exceeded the regulatory minimum at the time".
Banks added to the register will be required to disclose the breach in the following product disclosure statement.
Any breach displayed in the register will be deleted five years after it was published.
