Statement of reasons
This note is not part of the notice, but is intended to indicate its general effect.
This notice comes into force on the day after its notification in the Gazette and expires on 30 November 2016.
Nelson Building Society (NBS) is a deposit taker within the meaning of Part 5D of the Reserve Bank of New Zealand Act 1989 (the Act). This notice exempts NBS from one of the requirements as to how it must calculate its capital for the purpose of the prudential requirements about capital ratios.
The Reserve Bank of New Zealand, after taking into account the principles set out in section 157F of the Act and satisfying itself as to the matters set out in section 157G(2) of the Act, considers it is appropriate to grant the exemption because—
NBS is similar in character to
“qualifying mutuals”, yet its preference shares may only constitute 25% of capital, rather than 50%, because building societies are excluded from the definition of qualifying mutual in the Deposit Takers (Credit Ratings, Capital Ratios, and Related Party Exposures) Regulations 2010. This inconsistency in the treatment of similarly placed entities is disadvantageous for NBS, which was a mutual organisation that had high levels of preference share capital relative to total capital when those regulations came into force on 1 December 2010. In the circumstances, it is considered that it would be unduly onerous and burdensome to restrict NBS to the 25% capital preference share limit that is intended for non-mutual organisations that do not have restrictions on their capacity to raise ordinary voting share capital. A temporary exemption until 30 November 2016 provides sufficient time for NBS to transition to the requirement that preference shares may only constitute 25% of capital:
the limited nature of the exemption will not be prejudicial to the maintenance of a sound and efficient financial system. The proposed exemption will allow NBS to be treated similarly to other mutual organisations that lack ordinary share capital, while providing a suitable period of time to achieve compliance:
as this will be a conditional exemption for an individual firm and as the exemption will be limited in duration, it will not be broader than is reasonably necessary to address the matters that gave rise to the exemption.
Date of notification in Gazette: 21 July 2011.
This notice is administered by the Reserve Bank of New Zealand.