I am interested in how to judge a suitable level of capital for banks and in particular for HNZ and Kiwibank?
I've been over HNZ a couple of times, and capital seemed adequate to a non-banker. I am thinking I calculate capital adequacy ratio by putting the $344m of tier 1 capital over the $2057m of risk weighted exposures (16.7%) - is that correct? They have a 12% minimum in their conditions of registration vs Basel III minimum of 6%, so does Basel III have any effect at all for them? Is part of your concern re capital a presumption that the $143m value of their non-core property book is going to trend rapidly downwards and perhaps halve or worse? Or is it more in regard to capital requirements for growth? How much capital is enough?
Does Basel III have greater impact for Kiwibank (who currently only have a condition of 4.5% tier 1, up from 4% last year)? Although, if I am reading their disclosure statement correctly, I think they have 10.6% currently, so maybe a non-issue there too? It's pretty close to the 10.9% for ANZ's New Zealand operation?Anyway, appreciate your comments, Xerof, if you get the chance. :)Quote:
With effect from 1 January 2013, the Bank’s conditions ofregistration were amended to implement the Reserve Bank’sBasel III policy. The changes include a requirement to maintaina Common Equity Tier 1 capital ratio of not less than 4.5% from1 January 2013, and the requirement to ensure a buffer ratio of2.5% with effect from 1 January 2014.