23 FEBRUARY 2007

NEW ZEALAND GAZETTE, No. 21

509

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 required by Accounting Standards Review Board requirements to adopt them for accounting periods starting on or after 1 January 2007. The existing disclosure requirements were amended in March 2005 to handle the early adoption option but those amendments will no longer be effective once the international standards are mandatory.

The three reporting dates end-March, end-June and end-September 2007 represent a transitional period during which registered banks will be reporting on a mixture of accounting standards. The first date on which all banks will be reporting subject to international standards will be 31 December 2007. As a result, some minor amendments are needed to the disclosure requirements to ensure that they contain the appropriate definitions and cross-references for banks on all combinations of reporting standards, for reporting dates beginning with 31 March 2007. The amendments are largely mechanical. They add references to new accounting standards. Some new definitions have been added and others have cross references to the new standards.

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 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, 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;

d
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 overseas banking group’s equity;

e
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;

f
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.

The General Short Form Disclosure Statement required by this Order in Council is an abbreviated version of the General Disclosure Statement required by the Registered Bank Disclosure Statement (Full and Half-Year - Overseas Incorporated Registered Banks) Order 2007.

Each bank must also publish a Supplemental Disclosure Statement, unless the information it would include is contained in the General Short Form Disclosure Statement. The Supplemental Disclosure Statement 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. This Order in Council requires the following information to be contained in a Supplemental Disclosure Statement:

a
the conditions of registration imposed by the Reserve Bank on the registered bank pursuant to section 74 of the Reserve Bank of New Zealand Act;

b
the contract of guarantee and financial statements of any guarantor, where the material obligations of the overseas bank are guaranteed;

c
where the overseas bank has entered into any material cross guaranteeing arrangements, a copy of the full guarantee contract if there is a contract which sets out, or is representative of, the rights and obligations of all the cross guarantors;

d
the most recent publicly available financial statements of the overseas bank and overseas banking group of which the registered bank is part;

e
where the overseas bank conducts in New Zealand outside the New Zealand banking group any insurance business or non-financial activities, the most recent publicly available financial statements of that business or those activities.

A bank has two months from its off-quarter balance date to publish the disclosure statements required by this Order in Council. The exception to this is where a bank elects to have its General Short Form Disclosure Statement audited by an external auditor, in which case the bank has three months to publish its disclosure statement.

The disclosure statements published pursuant to this Order in Council are not required to be audited nor to be subject to a limited review by an external auditor.