23 FEBRUARY 2007

NEW ZEALAND GAZETTE, No. 21

441

8. Aggregate Foreign Currency Exposure—The Registered Bank shall derive the amount of Aggregate Foreign Currency Exposure in accordance with either:

(a) clauses 9 and 10 of this Schedule; or

(b) any other method, but only if the Aggregate Foreign Currency 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 8(a) of this Schedule.

9. Foreign Currency Exposure in a Single Foreign Currency—(1) Subject to clauses 9(2) and 9(4) of this Schedule, a Banking Group’s Foreign Currency Exposure in a single foreign currency is derived by:

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

(b) multiplying the amount derived in clause 9(a) of this Schedule by 0.08.

(2) Subject to clause 9(3), the value of a Financial Instrument is either:

(a)
(i) in the case of an unrecognised Financial Instrument and a recognised Financial Instrument which is a market related contract, the face or contract amount of the Financial Instrument expressed in New Zealand dollars using the relevant spot exchange rate; and

(ii) in the case of other Financial Instruments, the carrying amount of the Financial Instrument expressed in New Zealand dollars using the relevant spot exchange rate; or

(b) the present value of that Financial Instrument expressed in New Zealand dollars using the relevant spot exchange rate.

(3) Notwithstanding clause 9(2) of this Schedule, the value of options in a single foreign currency shall be either the delta equivalent value, or a value derived using the Registered Bank’s own method for valuing the open position arising from options in that foreign currency.

(4) For the purposes of clause 9(1) of this Schedule, Financial Instruments which have been issued by associates of the Registered Bank or which have been included in the Capital of the Banking Group shall not be included in the calculation of the Banking Group’s Foreign Currency Exposure.

10. Aggregate Foreign Currency Exposure—A Banking Group’s Aggregate Foreign Currency Exposure is the absolute value of the greater of the sum of any positive Foreign Currency Exposures and the sum of any negative Foreign Currency Exposures.

11. Aggregate Equity Exposure—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 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 financial year and half year. It replaces the Registered Bank Disclosure Statement (Full and Half – Year—New Zealand Incorporated Registered Banks) Order 2005, and comes into force on 30 March 2007.

The principal amendments to the 2005 Order included in this 2007 Order are to provide for the fact that Registered Banks will be required to adopt New Zealand equivalents of international financial reporting standards and New Zealand equivalents of international accounting standards for accounting periods starting on or after 1 January 2007. Registered Banks have had the option of adopting these international standards early, over the period 1 January 2005 to 31 December 2006, but will be