Australia’s big four banks won’t be able to receive dividends from their Kiwi subsidiaries during the coronavirus crisis as New Zealand’s central bank takes steps to protect its financial system.
The banks have also agreed not to redeem any tier one capital instruments they had sold to investors until the crisis is over, the Reserve Bank of New Zealand said on Thursday.
ANZ said this request would prevent it from redeeming $NZ500 million in capital notes in May, although it still would make interest payments on those notes and has the option of turning them into ordinary shares.
“This initiative further supports the stability of the financial system by maintaining higher levels of capital during the period of falling economic activity resulting from the COVID-19 pandemic,” deputy governor and general manager for financial stability Geoff Bascand said.
The RBNZ said it would also defer the start of increased capital requirements and other regulatory initiatives to allow the country’s banks to focus on lending.
It will further introduce a new longer-term funding scheme for the banking system to promote liquidity by ensuring access to funding for banks at low interest rates for up to 3 years duration.
“New Zealand’s financial system remains sound, with strong capital and liquidity buffers,” Reserve Bank Governor Adrian Orr said .
“We are confident that the financial system is well placed to respond to the impacts of coronavirus.”
Commonwealth Bank said it had “strong surplus capital” and so was well-placed to absorb the suspension of dividends from its ASB subsidiary.
NAB said it didn’t anticipate the suspension of dividends from its Bank of New Zealand subsidiary would affect its Tier 1 capital position.