3080 NEW ZEALAND GAZETTE No. 126

Foreign Currency Exposures and the sum of any negative Foreign Currency Exposures.

Aggregate Equity Exposure

11. The Registered Bank shall derive the amount of its Aggregate Equity Exposure in accordance with either:

    (a) clauses 12 and 13 of this Schedule; or

    (b) any other method, but only if the Aggregate Equity Exposure derived with that method is not, in the opinion of the Registered Bank (such opinion to be based on reasonable grounds), Materially lower than the amount derived pursuant to clause 11 (a) of this Schedule.

12. Equity Exposure in a single currency—(1) Subject to clauses 12 (2) and 12 (3) of this Schedule a Banking Group’s Equity Exposure in a single currency is derived by:

    (a) subtracting the aggregate amount of the value of all of the equity instruments (whether recognised or unrecognised) of the Banking Group in that currency that are Financial Liabilities from the aggregate amount of the value of all the equity instruments (whether recognised or unrecognised) of the Banking Group in that currency that are Financial Assets; and

    (b) multiplying the amount derived in clause 12 (a) of this Schedule by 0.08.

    (2) Notwithstanding clause 12 (1) of this Schedule, the value of equity instruments issued by associates of the Registered Bank shall not be included in the calculation of the Banking Group’s Equity Exposure.

    (3) Subject to clause 12 (4) of this Schedule, the value of an equity instrument is:

    (a) in the case of an unrecognised equity instrument and a recognised equity instrument which is a market related contract, the face or contract amount of the equity instrument expressed in New Zealand dollars using the relevant spot exchange rate; and
    
    (b) in the case of other equity instruments, the carrying amount of the equity instrument expressed in New Zealand dollars using the relevant spot exchange rate.

    (4) Notwithstanding clause 12 (3) of this Schedule, the value of:

    (a) a net equity futures position is the marked-to-market value of the notional underlying equity position;
    
    (b) a net equity option position is the delta equivalent value.

13. Aggregate Equity Exposure—The Banking Group’s Aggregate Equity Exposure is the sum of the absolute values of the Equity Exposures in each currency.

Explanatory Note

This note is not part of the Order in Council, but is intended to indicate its general effect.

This Order in Council is promulgated pursuant to section 81 (1) of the Reserve Bank of New Zealand Act 1989 and applies to a registered bank which is incorporated in New Zealand, in respect of each such bank’s end of financial year and half year.

The Order in Council is one of four which replace four original Orders promulgated in 1995, and amended in 1996. The 1995 Orders provided for a public disclosure regime for registered banks, and replaced prospectus requirements imposed under the Securities Act 1978 on registered banks in respect of their offers of debt securities to the public.

More specifically, this Order in Council replaces the Registered Bank Disclosure Statement (Full and Half-Year—New Zealand Incorporated Registered Banks) Order 1995 and the Registered Bank Disclosure Statement (Full and Half-Year—New Zealand Incorporated Registered Banks) Amendment Order 1996, and comes into force on 1 October 1998.

This Order integrates the disclosure requirements of the 1995 Order and its 1996 amendment, and aligns and cross-references them to the reporting requirements of the accounting standard FRS-33: Disclosure of Information by Financial Institutions (FRS-33) was approved by the Accounting Standards Review Board in April 1997, and came into effect for accounting periods beginning on 1 April 1997. It also revises the disclosure requirements of the previous Orders in the light of the experience gained with the disclosure regime for registered banks since its commencement in 1996.

A description of the principal provisions of the revised disclosure regime is given below.

Under the disclosure regime, all registered banks are required to issue a public disclosure statement each quarter. The disclosure statement required to be published pursuant to this Order in Council comprises a Key Information Summary, a General Disclosure Statement and, if applicable, a Supplemental Disclosure Statement.

The Key Information Summary provides a brief summary of key financial information on the registered bank and its banking group, and must be made available free of charge immediately upon request. The Key Information Summary must also be displayed prominently in each bank branch and in any other customer-accessible bank premises, and made available or displayed on a bank’s internet website.

The General Disclosure Statement is required to contain a comprehensive range of financial and corporate information on the bank and its banking group. The General Disclosure Statement need not be displayed in each bank branch, but must be made available free of charge, immediately if the request is made at a bank’s head office, or within five working days if the request is made at a bank branch or at any customer-accessible bank premises other than the head office. The information required to be included in a General Disclosure Statement includes:

a general information on the structure of the bank, the members of the banking group and information on guarantee arrangements (where applicable);
b a statement as to whether the bank has a credit rating, and if so, a disclosure of that rating;
c comprehensive financial statements for the bank and banking group, prepared in accordance with generally accepted accounting practice, including asset quality and risk concentration information;
d information on capital adequacy (using the Reserve Bank of New Zealand’s capital adequacy framework);
e information, both as at the end of the half year or full year and peak over the most recent quarter of the accounting period to date, on exposure concentrations to individual counterparties and groups of closely related counterparties and to connected persons;
f market risk information, both as at the end of the half year or full year and peak over the most recent quarter of the accounting period to date, on the banking group’s interest rate exposure, foreign currency exposure and equity exposure. A bank is required to disclose its exposure to each of these categories of market risk, as an amount and as a percentage of the banking group’s equity;
g descriptions of the banking group’s policies and systems for identifying, monitoring and managing its risks;
h statements signed by the directors of the bank, including an attestation as to whether the directors are satisfied that a banking group’s internal controls are adequate for managing the group’s material business risks and whether the controls have been properly applied over the reporting period, and a statement that the disclosure statement is not false or misleading;