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The Reserve bank’s temporary ban affects more than $1b of securities

Thursday 2nd April 2020

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The Reserve bank’s temporary ban on dividends and debt redemptions affects more than $1 billion of bank securities. 

 “To further support the stability of the financial system during this period of economic uncertainty, we have agreed with the banks that during this period there will be no payment of dividends on ordinary shares, and that they should not redeem non-[common equity tier one] capital instruments,” said deputy governor and general manager for financial stability Geoff Bascand.

“This initiative further supports the stability of the financial system by maintaining higher levels of capital during the period of falling economic activity resulting from the Covid-19 pandemic,” he said.

The restrictions will stay in place until further notice.

Several banks have made disclosures to the NZX that their securities would be impacted.

For example, ANZ said the change meant it would not be able to redeem $500 million of capital note on the May 25 optional exchange date. The bank said the RBNZ restrictions did not affect its ability to pay interest on the notes. 

The BNZ and Kiwibank are also affected. BNZ disclosed that it was unlikely to gain permission to redeem its $550m of subordinated unsecured notes in December as it had the option to do. Kiwibank also disclosed that its option to redeem $150m of perpetual bonds and $150m of perpetual capital notes in May could not be exercised.

ASB and Heartland are not affected by this recent ban.

This article is based on an article in the NBR today by Tim Hunter 

Source: NBR


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