Powered by MOMENTUM MEDIA
subscribe to our newsletter

NZ freezes bank dividends

The central bank of New Zealand has frozen the distribution of dividends on ordinary shares across all banks in the New Zealand market, affecting the big four banks.

The Reserve Bank of New Zealand (RBNZ) has announced restrictions on all banks operating in New Zealand, freezing the distribution of dividends on ordinary shares for the duration of the COVID-19-induced economic crisis.

New Zealand-based banks are also unable to redeem CET-1 capital instruments during this time, with restrictions coming into effect immediately under revisions made to the Conditions of Registration and issued to all locally incorporated banks.

The deputy governor and general manager for financial stability at the RBNZ, Geoff Bascand, said the changes have been implemented in an attempt to “support the stability of the financial system” during the difficult economic climate caused by the outbreak of COVID-19.

According to the RBNZ, the restrictions will remain in place until further notice, with the aim of relaxing them when the economic outlook has “sufficiently recovered”.

Advertisement
Advertisement

“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,” Mr Bascand said.

The big four respond

Australia’s major four banks, all of which own subsidiaries in the New Zealand market, have acknowledged the changes introduced by the RBNZ and reassured shareholders that the latest restrictions will have minimal impact on capitalisation.

ANZ Bank New Zealand, the largest banking group in New Zealand and a wholly owned subsidiary of ANZ, stated that the RBNZ’s decision has prevented it from redeeming its NZ$500 million ($487.5 million) capital notes on 25 May 2020, “although it is able to continue to make interest payments on those capital notes”, according to ANZ.

“The terms of the capital notes also provide for their conversion into a variable number of ANZ ordinary shares in May 2020 or May 2022”, subject to certain conditions to be set out, according to the banking group.

PROMOTED CONTENT


“Conversion would result in an equivalent increase in ANZ’s common equity tier 1 capital (~12 basis points at level 2)”, ANZ stated.

The Commonwealth Bank of Australia (CBA), the parent company of Auckland-based ASB Bank, stated that it is “well capitalised” as at 31 December 2019, and that it is in the position to absorb the suspension of ASB dividends.

According to CBA, the dividends from its New Zealand subsidiary “only affect CBA’s level 1 CET1”, and its “strong level 1 surplus capital position” means the bank is “well placed” to absorb the difference, for the duration of the RBNZ restrictions.

NAB responded to the news in relation to its wholly owned subsidiary BNZ and stated that it does not anticipate the restrictions to have any “material impact” on NAB’s level 1 capital position, nor its level 2 capital ratio.

Meanwhile, Westpac announced that non-payment of dividends from its New Zealand subsidiary, Westpac New Zealand, “only affects” its level 1 CET 1 capital ratio.

[Related: Westpac appoints permanent replacement for Hartzer]

NZ freezes bank dividends
mortgagebusiness

If you’re feeling overworked and overwhelmed in this fast-paced mortgage market, it’s time to make some changes, and the Business Accelerator Program can help! Tickets are on sale now. Work smarter, not harder, this year.

Hannah Dowling

Hannah Dowling is a journalist for mortgage business, the leading source of news, opinion and strategy for professionals working in the mortgage industry.

Prior to joining the team at Mortgage Business, Hannah worked as a content producer for a podcast catering to property investors. She also spent 6 years working in the real estate sector at a local agency. 

Hannah graduated from Macquarie University with a Bachelor of Media and Journalism. 

You can email Hannah at: This email address is being protected from spambots. You need JavaScript enabled to view it.

Latest News

True Savings, a new online brokerage headed by former CBA executive Pete Steel, has entered the Australian mortgage market. ...

Pre-registrations have opened for Citi’s upcoming buy now, pay later offering, Spot., which will launch in October. ...

New Zealand’s central bank is primed to further tighten mortgage lending standards, following concerns with a rise in high-LVR and high-DT...

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

How long do you think it should take to discharge a mortgage?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.