NEW ZEALAND Law and Practice Contributed by: Deemple Budhia, Ling Yan Pang, Fred Ward and Matt Kersey, Russell McVeagh
respect of a bank’s registration as a registered bank, which include a requirement to comply with capital and liquidity requirements. If a reg - istered bank has not complied with its conditions of registration, the RBNZ can recommend to the government that the bank should have its regis - tration as a registered bank cancelled. Criminal penalties may also apply in respect of a breach of a registered bank’s conditions of registration. New Zealand’s capital adequacy framework, with which locally incorporated registered banks are required to comply, sets out how a registered bank is required to account for its securitisation activities in determining its capital adequacy compliance obligations. A registered bank must consolidate an SPE when determining the banking group for the purposes of the capital adequacy framework if: • the banking group is required under New Zea - land generally accepted accounting practice to consolidate the SPE for the purposes of its group financial statements; • the SPE is a “covered bond SPV” for the pur - poses of the New Zealand legislative frame - work for covered bonds; • the registered bank or a member of its bank - ing group has provided credit enhancement in the form of a guarantee, or in such a form that the maximum extent of the liability cannot be quantified; • there is insufficient separation between the bank and the securitisation; or • the securities issued by the SPE have a short - er maturity profile than the underlying assets, and the registered bank may be required to fund some of the assets when the securities mature.
If a registered bank provides credit enhance - ment to an SPE but is not required to consolidate the SPE, it still must take this into account in its calculations of capital, for example as a deduc - tion from Common Equity Tier 1 Capital. The amount of aggregate funding provided to all associated SPEs not consolidated as described above and all affiliated insurance groups must not exceed 10% of the registered bank’s Com - mon Equity Tier 1 Capital. Where the 10% limit is breached, the full amount of funding must be deducted from Common Equity Tier 1 Capital. Non-Bank Deposit Takers The RBNZ also imposes restrictions on related- party exposures and imposes capital require - ments on non-bank deposit takers. For these purposes, a non-bank deposit taker must con - solidate an SPE for the purposes of its capital and related party calculations if this would be required under New Zealand accounting stand - ards for the purposes of group financial state - ments. Deposit Takers Act The Deposit Takers Act 2023 received Royal Assent on 6 July 2023, establishing a new regime for the regulation of deposit takers and implementing, among other things, capital requirements to be set through standards or as conditions of licences on individual deposit takers. Consultation on the Act’s application is ongoing, aiming to develop policy, standards and regulations prior to the full commencement of the new regime, which is currently anticipated to be July 2028. 4.7 Use of Derivatives There are no specific rules in New Zealand regarding the use of derivatives in securitisa - tions.
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