11 FEBRUARY 2005

NEW ZEALAND GAZETTE, No. 35

929

(b) any other method, but only if the Aggregate Equity Exposure derived in accordance 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; and

(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 “off-quarters” (i.e. the first and third
quarters of the bank’s financial year). It replaces the Registered Bank Disclosure Statement (Off-Quarter—New Zealand
Incorporated Registered Banks) Order 1998, and comes into force on 30 March 2005.\n
The principal amendments to the 1998 Order included in this 2005 Order are to:

• allow banks to voluntarily adopt New Zealand International Accounting Standards and New Zealand International Financial
  Reporting Standards from 1 January 2005 before these standards become compulsory in New Zealand from 1 January 2007;
• require the disclosure of information about the marketing and distribution of insurance products;
• remove the materiality criterion from the disclosure of prudential information;
• include additional disclosures related to corporate governance matters;
• modify the disclosure of information about impaired assets, concentrations of credit exposures to individual counterparties,
  and exposures to connected persons.

It also revises some other disclosure requirements of the previous Order 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 Short Form 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 Short Form Disclosure Statement is required to contain a range of financial and corporate information on the
bank and its banking group. The General Short Form 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 Short Form Disclosure Statement includes:

a information about credit ratings the bank is required to have, and a disclosure of the current level of each such rating;

b short form financial statements for the banking group, including details on asset quality;

c information on capital adequacy (using the Reserve Bank of New Zealand’s capital adequacy framework);

d information, both as at the end of the off-quarter and in respect of peak for the most recent quarter of the accounting
period, on the banking group’s exposure concentrations to individual counterparties and groups of closely related
counterparties and to connected persons;

e market risk information, both as at the end of the off-quarter and in respect of peak for the most recent quarter of the
accounting period, 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, both as an amount and as a percentage of
the banking group’s equity;

f descriptions of the banking group’s policies and systems for managing risks in respect of a new category of risk not
previously incurred by the banking group;