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(Adds the position of the current capital ratio, the RBNZ capital requirement history, details)
July 29 (Reuters) – Australian and New Zealand banks on Monday announced new risk weights for their mortgage and farm portfolios in New Zealand, resulting in a reduction in the capital ratio of the group and its banking units.
ANZ said in a statement that these changes would result in a 20 basis point reduction in the bank's Tier 2 capital ratio (CET1). The bank said the changes followed a "notification" by the Australian Prudential Regulatory Authority.
The changes resulted from an increase in risk weights applied by the Reserve Bank of New Zealand for these portfolios. Risk-weighted badets are used to determine the minimum amount of capital that banks and other institutions must have to reduce risk in the event of a major financial shock.
In May, the New Zealand central bank announced that it had withdrawn ANZ's local license to calculate its operational risk capital because of "persistent" control failures, thereby increasing the requirement to minimum capital of the bank in the country.
The major Australian lenders said earlier this month that they should either downsize their operations in New Zealand or consider selling them entirely if the country decides to increase their planned capital increases that the banks should hold.
ANZ stated that its Tier 1 capital ratio, which excludes subsidiaries, would not be changed, and that the higher risk weights for New Zealand were included in the Tier 1 ratio as at March 31, 2019.
As of June 30, 2019, ANZ's level 2 equity ratio of ANZ was 11.8%, exceeding the 10.5% required by APRA, the bank said. Level 2 concerns reporting for the group and its banking subsidiaries.
Report by Devika Syamnath in Bengaluru;
Edited by Sonya Hepinstall and Stephen Coates
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