11 FEBRUARY 2005 NEW ZEALAND GAZETTE, No. 35

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(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 a country other than New Zealand, and which operates in New Zealand as a branch of the overseas bank, in respect of each such bank’s financial year and half year. It replaces the Registered Bank Disclosure Statement (Full and Half–Year—Overseas Incorporated Registered Banks) Order 1998, and comes into force on 30 March 2005.

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.

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 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 information about credit ratings the bank is required to have, and a disclosure of the current level of each such 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, both as at the end of the half year or full year and in respect of peak for the most recent quarter of the accounting period, on exposure concentrations to individual counterparties and groups of closely related counterparties;

e market risk information, both as at the end of the half year or full year 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, as an amount and as a percentage of the overseas banking group’s equity;

f descriptions of the banking group’s policies and systems for identifying, monitoring and managing its risks;

g statements signed by the directors and the New Zealand chief executive officer of the bank, including an attestation as to whether the directors and the New Zealand chief executive officer are satisfied that the banking group had systems in place to monitor and control adequately 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;

h information on the banking group’s funds management and securitisation activities, the marketing and distribution of insurance products, to the extent it has any;

i information on the directorate and auditors of the bank.

Each bank must also publish a Supplemental Disclosure Statement, unless the information it would include is contained in the General Disclosure Statement. The Supplemental Disclosure Statement must be made available free of charge, immediately if