BNZ says NAB has room to provide funding if necessary

BNZ believes its parent National Australia Bank (NAB) has more room to provide funding support for its New Zealand subsidiary under the current APRA (Australian Prudential Regulatory Authority) rules than the Australian parents of some other big New Zealand banks. The current rules, known as APS 222, state that an Australian bank can't put more than 50% of its tier 1 capital (less equity invested) into its New Zealand subsidiary. BNZ chief financial officer Ken Christie said the bank had various sources of funding it could call on over the coming months, including any reopened Commercial Paper market, the Reserve Bank's RMBS facility and its parent NAB. BNZ had moved to lengthen the terms of its foreign funding to avoid having to rely too heavily on its parent, he said. "We (NAB) also have capacity under the APRA standard APS222. We have a fair bit of headroom because we've been very proactive in driving our offshore funding programme, starting 3 or 4 years ago and we're probably very well placed in that position relative to our peers in the market," Christie said. "If you haven't started an offshore debt programme early and you continued to borrow from your parent you could be in a bit of a bind," he said. BNZ would not say which other bank may have less headroom to call for funding support from its parent. * This article was first published exclusively yesterday in our daily subscription newsletter for the banking and finance industries. The email costs NZ$365 per annum and carries exclusive news and analysis for New Zealand banking and finance industry executives, regulators and investors. Sign up for a free trial here.