Hot Copper is boring by comparison
Well thank you guys for your blatant ramping :D.
Best Wishes
Paper Tiger
Updating Capital Requirements for FY2015
Quote:
Originally Posted by
Snoopy
This 'minimum capital requirement' has been discussed on this thread before. See post 2990, the interest.co.nz reference quoted by Captain Dan. You are correct PT, the 'minimum capital requirement' (for the Bank) remains at 12%.
"Since January 1 this year banks also require a buffer ratio for common equity tier one capital of at least 2.5%. This buffer ratio is described by the Reserve Bank as a counter-cyclical capital buffer that can be applied in times of excessive credit growth. It's part of the Reserve Bank's version of the global Basel III bank capital adequacy standards, which have been endorsed by the G20. Heartland isn't required to maintain this buffer."
My 14.5% equated to 12% + 2.5% (the buffer). I now see that Heartland has an exemption regarding this buffer.
The Basel III requirements have previously not effected the Banking Group's minimum capital requirements as the Banking Group’s Conditions of Registration prescribe minimum capital requoirements higher than Basal III requirements. On January 14th 2015 , the Reserve Bank has consented to the reduction of its regulatory capital requirements, bringing them in line with other New Zealand registered banks.
Today I want to update the Heartland New Zealand banking covenants in relation to the for the June 30th 2014 quarter (corresponding to the EOFY).
The document I am referencing is the:
"Heartland Bank Disclosure Statement for the year ended 30th June 2014"
Note 39 (p63), contains the information on capital adequacy.
All Tier 1 capital for Heartland is shareholder equity.
Heartland's 2018 Subordinated Bonds (the Bonds) constitute Tier 2 Capital of the Banking Group. The Bonds had an issue period from 12 July 2013 to 15 December 2013 and have a maturity date of 15 Decembe 2018.
The information supplied is as follows:
Common Equity Tier 1 ratio: ( RBNZ minimum of 4.5% + 2.5% buffer)
Total Tier 1 ratio: ( RBNZ minimum of 6.0% + 2.5% buffer)
Total Tier 1 & 2 ratio: ( RBNZ minimum of 8.0% + 2.5% buffer)
As of September 30 2014, Heartland had a common equity tier 1 ratio, as a percentage of total risk weighted exposures, of 13.99%, tier 1 capital ratio of 13.99%, and total capital ratio of 14.09%. Its buffer ratio was then 1.99%
Note 39 contains detailed notes on just how the Heartland NZ capital is made up. If you use that information and use it to calculate the above ratios, based on a loan book with net loans and advances of $1,985.119m (from the balance sheet) I calculate the above ratios as follows:
Common Equity Tier 1 ratio: $334.981m/$1,985.119m = 16.9%
Total Tier 1 ratio: $334.981m/$1,985.119m = 16.9%
Total Tier 1 & 2 ratio: $337.487m/$1,985.119m = 17.0%
Risk weighted exposure (scaling of the loan book) as per note 39f gives a slightly different result.
Common Equity Tier 1 ratio: $334.981m/$2,344.744m = 14.3%
Total Tier 1 ratio: $334.981m/$2,344.744m = 14.3%
Total Tier 1 & 2 ratio: $337.487m/$2,344.744m = 14.4%
Why the difference between the two calculations? That is because the Tier 1 and Tier 2 capital figures have been 'risk adjusted' before they went into the second calculation. The risk adjustment is done because the expected capital recovery from loans should they go bad is different among the different classes of loans (corporate, sovereign, bank, retail mortgages and other retail).
SNOOPY
PS Tabulated version of above results
|
30/06/2014 (quote) |
30/06/2014 (risk adj) |
RBNZ Required (FY2015) |
Common Equity Tier 1 Ratio |
16.9 |
14.3 |
4.5+2.5 |
Total Tier 1 Ratio |
16.9 |
14.3 |
6.0+2.5 |
Total Tier 1&2 Ratio |
17.0 |
14.4 |
8.0+2.5 |