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Win win win …

RBNZ capital requirements changes 5th Dec 2019.

Whilst on the face of it going to 16% tier one capital is onerous.

Banks in Australia who own the NZ ones have been aware of this for 2 years.

2 years.

They have been shoring up their capital in expectation of it.
ANZ and WBC the main ones hit both now have come out with a requirement of around NZD 7 billion needed tier one.

It sounds bad, it is in fact far better than expected.

Massively so.

Instead of allowing 5 years, its now 40% more and 7 years.
Secondly weighting for capital requirements have been relaxed.
What is allowed for being called tier one capital RELAXED and preference perpetual share debt that is convertible is now allowed.

Massive all of these.

It gets better.

RBNZ estimates it will make loans 32 basis points more expensive as it is allowing banks to raise their margins and in fact it will generate massive increases in profits in NZ which, will of course be retained and in fact pay for itself.

I suspect about HALF if not more of additional capital will be raised and retained with zero impact to the payout to shareholders. It will of course see say 400 million NZD rising to 750 million each year more profits after tax, but these will be retained.

Bottom line ? Well shareholders get a much more secure bank overall.

Big losers ? Whilst inconvenient and a cost already having this impost of 16% capital required, end result is passed onto the consumer and the investor whilst not profiting from the misery of the poor consumer, gets an institution with massive capital buffers.

Whilst so many have worried about this for so long, the end result is actually far far far less than feared. Having 7 years, an open and published acceptance by RBNZ that the net margin banks earn will rise 0.32% …. and the relaxing of how risk is counted coupled with some relaxation of what is counted by RBNZ as actual capital means basically …. NOTHING.

Win win win … except for poor NZ consumers.

I do note how absurd it is to raise capital requirements to worlds best, highest cost and when the USA and EU will not even confirm to the much lower levels and ones 4% lower by 2024 makes it all a nonsense. In a global market, when an issue such as the GFC occurs, global systemic risk is key.

Whilst nice, and pretty, its absurd if not idiotic to demand this of banks when more than likely the risk will be global. Having 16% capital cushion in say 2027 when its likely some will be delayed and be holding 11% or less makes your banks not really that much safer in a global contagion, which is likely what will occur next crisis.

Reading the 300 pages of PDF's released I am somewhat agog at how much has been given on one hand …. and taken on the other via higher consumer and borrowing costs.

As to predictions of end of the world or payout ratios using idiotic past data when say WBC used to pay out $1.88 and its now $1.60 speaks for itself.

Suggestions of some new force about to take over banking, well, it will be regulated just the same and have no capital, no infrastructure and be required to report and provide similar if not identical safeguards as existing banks. In short the hurdle just got higher and entry to the market harder and more expensive as a result.

Similar things occurring in Australia for identical reason and recent rate cuts, not passed on …. same reasons and same result. Lions share of the fall in dividends already occurred and implemented with most cutting by 10% the size of the dividend paid.

Good luck

ANZ up WBC up and the prediction of some 6% fall somewhat amusing right now.

<blockquote data-quote="kahuna1" data-source="post: 1047865" data-attributes="member: 30">Win win win …RBNZ capital requirements changes 5th Dec 2019.Whilst on the face of it going to 16% tier one capital is onerous.Banks in Australia who own the NZ ones have been aware of this for 2 years.2 years.They have been shoring up their capital in expectation of it.ANZ and WBC the main ones hit both now have come out with a requirement of around NZD 7 billion needed tier one.It sounds bad, it is in fact far better than expected.Massively so.Instead of allowing 5 years, its now 40% more and 7 years.Secondly weighting for capital requirements have been relaxed.What is allowed for being called tier one capital RELAXED and preference perpetual share debt that is convertible is now allowed.Massive all of these.It gets better.RBNZ estimates it will make loans 32 basis points more expensive as it is allowing banks to raise their margins and in fact it will generate massive increases in profits in NZ which, will of course be retained and in fact pay for itself.I suspect about HALF if not more of additional capital will be raised and retained with zero impact to the payout to shareholders. It will of course see say 400 million NZD rising to 750 million each year more profits after tax, but these will be retained.Bottom line ? Well shareholders get a much more secure bank overall.Big losers ? Whilst inconvenient and a cost already having this impost of 16% capital required, end result is passed onto the consumer and the investor whilst not profiting from the misery of the poor consumer, gets an institution with massive capital buffers.Whilst so many have worried about this for so long, the end result is actually far far far less than feared. Having 7 years, an open and published acceptance by RBNZ that the net margin banks earn will rise 0.32% …. and the relaxing of how risk is counted coupled with some relaxation of what is counted by RBNZ as actual capital means basically …. NOTHING.Win win win … except for poor NZ consumers.I do note how absurd it is to raise capital requirements to worlds best, highest cost and when the USA and EU will not even confirm to the much lower levels and ones 4% lower by 2024 makes it all a nonsense. In a global market, when an issue such as the GFC occurs, global systemic risk is key.Whilst nice, and pretty, its absurd if not idiotic to demand this of banks when more than likely the risk will be global. Having 16% capital cushion in say 2027 when its likely some will be delayed and be holding 11% or less makes your banks not really that much safer in a global contagion, which is likely what will occur next crisis.Reading the 300 pages of PDF&#039;s released I am somewhat agog at how much has been given on one hand …. and taken on the other via higher consumer and borrowing costs.As to predictions of end of the world or payout ratios using idiotic past data when say WBC used to pay out $1.88 and its now $1.60 speaks for itself.Suggestions of some new force about to take over banking, well, it will be regulated just the same and have no capital, no infrastructure and be required to report and provide similar if not identical safeguards as existing banks. In short the hurdle just got higher and entry to the market harder and more expensive as a result.Similar things occurring in Australia for identical reason and recent rate cuts, not passed on …. same reasons and same result. Lions share of the fall in dividends already occurred and implemented with most cutting by 10% the size of the dividend paid.Good luckANZ up WBC up and the prediction of some 6% fall somewhat amusing right now.</blockquote>

[QUOTE="kahuna1, post: 1047865, member: 30"] Win win win … RBNZ capital requirements changes 5th Dec 2019. Whilst on the face of it going to 16% tier one capital is onerous. Banks in Australia who own the NZ ones have been aware of this for 2 years. 2 years. They have been shoring up their capital in expectation of it. ANZ and WBC the main ones hit both now have come out with a requirement of around NZD 7 billion needed tier one. It sounds bad, [U]it is in fact far better than expected[/U]. Massively so. Instead of allowing 5 years, its now 40% more and 7 years. Secondly weighting for capital requirements have been relaxed. What is allowed for being called tier one capital RELAXED and preference perpetual share debt that is convertible is now allowed. Massive all of these. It gets better. RBNZ estimates it will make loans 32 basis points more expensive as[U] it is allowing banks to raise their margins and in fact it will generate massive increases in profits in NZ [/U]which, will of course be retained and in fact pay for itself. I suspect about HALF if not more of additional capital will be raised and retained with [B]zero impact to the payout to shareholders[/B]. It will of course see say 400 million NZD rising to 750 million each year more profits after tax, but these will be retained. Bottom line ? Well shareholders get a much more secure bank overall. Big losers ? Whilst inconvenient and a cost already having this impost of 16% capital required, [U]end result is passed onto the consumer[/U] and the investor whilst not profiting from the misery of the poor consumer, gets an institution with massive capital buffers. Whilst so many have worried about this for so long, the end result is actually far far far less than feared. Having 7 years, an open and published acceptance by RBNZ that the net margin banks earn will rise 0.32% …. and the relaxing of how risk is counted coupled with some relaxation of what is counted by RBNZ as actual capital means basically …. NOTHING. Win win win … except for poor NZ consumers. I do note how absurd it is to raise capital requirements to worlds best, highest cost and when the USA and EU will not even confirm to the much lower levels and ones 4% lower by 2024 makes it all a nonsense. In a global market, when an issue such as the GFC occurs, global systemic risk is key. Whilst nice, and pretty, its absurd if not idiotic to demand this of banks when more than likely the risk will be global. Having 16% capital cushion in say 2027 when its likely some will be delayed and be holding 11% or less makes your banks not really that much safer in a global contagion, which is likely what will occur next crisis. Reading the 300 pages of PDF's released I am somewhat agog at how much has been given on one hand …. and taken on the other via higher consumer and borrowing costs. As to predictions of end of the world or payout ratios using idiotic past data when say WBC used to pay out $1.88 and its now $1.60 speaks for itself. Suggestions of some new force about to take over banking, well, it will be regulated just the same and have no capital, no infrastructure and be required to report and provide similar if not identical safeguards as existing banks. In short the hurdle just got higher and entry to the market harder and more expensive as a result. Similar things occurring in Australia for identical reason and recent rate cuts, not passed on …. same reasons and same result. Lions share of the fall in dividends already occurred and implemented with most cutting by 10% the size of the dividend paid. Good luck ANZ up WBC up and the prediction of some 6% fall somewhat amusing right now. [/QUOTE]

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