RBNZ wants to limit debt instruments – MSN

RBNZ wants to limit debt instruments – MSN

The Reserve Bank wants to remove certain debt instruments lenders use to raise funds which can then be deemed to meet regulatory capital levels set to avoid the event of a meltdown.

The central bank’s second options and issues paper on a wide-ranging review of the system’s capital framework proposes limiting common equity and preference shares as the only allowable instruments qualifying as Tier 1 capital.

Long-term, subordinated, unsecured debt without triggers that freeze interest payments would be Tier 2 capital.