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Basel II: A new capital framework

Author

Listed:
  • Bernard Hogetts
  • Andrew Yeh
  • James Twaddle
  • Mike Frith

    (Reserve Bank of New Zealand)

Abstract

This article provides an introduction to the new Basel II Capital Framework (Basel II) and the Reserve Bank's approach to its implementation in New Zealand. Bank capital plays an important role in absorbing unexpected losses Regulators have an interest in the amount of capital held by banks and set some minimum capital adequacy requirements for banks. Basel II replaces the current regulatory requirements and provides a new framework for thinking about capital's role in banking and how capital requirements should be calculated. The main objectives of Basel II are to increase the sensitivity to risk of regulatory capital requirements, and to provide incentives for banks to enhance their risk-management systems and processes. The Reserve Bank is responsible for setting regulatory capital requirements for banks incorporated in New Zealand. For locally-incorporated banks that also have operations overseas, the Reserve Bank liaises closely with the relevant foreign supervisors to ensure a smooth and efficient implementation and operation of the rules in New Zealand.

Suggested Citation

  • Bernard Hogetts & Andrew Yeh & James Twaddle & Mike Frith, 2005. "Basel II: A new capital framework," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 68, September.
    • Handle: RePEc:nzb:nzbbul:september2005:2
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    File URL: http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Bulletins/2005/2005sep68-3yehtwaddlefrith.pdf
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    References listed on IDEAS

    as
    1. Ken Matthews, 1996. "Capital adequacy ratios for banks," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 59, June.
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    Cited by:

    1. Andrea Mazzocchetti & Marco Raberto & Andrea Teglio & Silvano Cincotti, 2018. "Securitization and business cycle: an agent-based perspective," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 27(6), pages 1091-1121.
    2. G'eraldine Bouveret & Jean-Franc{c}ois Chassagneux & Smail Ibbou & Antoine Jacquier & Lionel Sopgoui, 2023. "Propagation of a carbon price in a credit portfolio through macroeconomic factors," Papers 2307.12695, arXiv.org, revised Apr 2024.
    3. Bulent Ozel & Reynold Christian Nathanael & Marco Raberto & Andrea Teglio & Silvano Cincotti, 2019. "Macroeconomic implications of mortgage loan requirements: an agent-based approach," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 14(1), pages 7-46, March.
    4. Teglio, Andrea & Mazzocchetti, Andrea & Ponta, Linda & Raberto, Marco & Cincotti, Silvano, 2019. "Budgetary rigour with stimulus in lean times: Policy advices from an agent-based model," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 59-83.

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