Reserve Bank capital requirements 'could prompt listing'
Reserve Bank moves to require banks to hold more capital could be good news for the share market.
Thursday, July 4th 2019, 5:59AM
Banks’ submissions on the Reserve Bank proposals have been released this week.
The RBNZ wants lenders to hold an extra 20% to 60% of capital. It plans to double minimum tier 1 capital from 8.5% to 16% for the big four, and to 15% for smaller lenders.
The banks have said that would significantly affect their activity in New Zealand. ANZ said it could need to review its operations in this country if the proposals were enacted in their current form.
Shane Solly, director and portfolio manager at Harbour Asset Management, said there was the potential for the big four banks to sell down a number of assets in New Zealand as a result.
Slowing lending was not the only way that banks could cope with higher capital requirements, he said.
It could mean listings for the NZX, which has been struggling to bring new offers to market.
An obvious candidate for sale was UDC, which ANZ had previously tried to sell.
“They could also sell the funds management business,” he said. “CBA could list, partially or otherwise, ASB, NAB could list, partially or otherwise, BNZ.”
“They may be better off reallocating capital into core banking.”
He said such a sell-down could need to be done in parts to allow the market time to process them because the listings could be of significant size.
But he said markets should be open to a well-structured listing. The businesses were well-known by institutional investors and strongly profitable.
“Certainly, at the moment, there is real demand for new listings.”
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