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Income Tax Act 2007

Recharacterisation of certain transactions - Interest apportionment on thin capitalisation - New Zealand banking group

FE 20: Financial value and regulatory value

You could also call this:

“Explaining how banks calculate financial and regulatory values for reporting”

When you look at sections FE 19, and FE 21 to FE 23, you’ll see something called the ‘financial value’ of an item for a New Zealand banking group. This is the amount of money that’s written down for that item in the group’s financial statements. These statements need to be about the right time, be made for people outside the bank to see, and follow the rules for how to show the money for a group of companies together, making sure they don’t count money between the companies twice.

In section FE 19, there’s also something called the ‘regulatory value’ of an item for a New Zealand banking group. This is the total value of the item when you think about how risky it is. The Reserve Bank of New Zealand decides how to work this out. They do this as part of their job to make sure banks are being careful with money, which they have to do because of a law called the Banking (Prudential Supervision) Act 1989.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516469.

Topics:
Money and consumer rights > Banking and loans
Money and consumer rights > Taxes
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FE 19: Banking group’s equity threshold, or

“Minimum equity requirement for NZ banking groups”

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FE 21: Banking group’s New Zealand net equity, or

“How to work out your bank's net value in New Zealand”

Part F Recharacterisation of certain transactions
Interest apportionment on thin capitalisation: New Zealand banking group

FE 20Financial value and regulatory value

  1. In sections FE 19, and FE 21 to FE 23, the financial value of an item for a New Zealand banking group at a time is the amount recorded for the item in the group’s financial statements that—

  2. relate to the time; and
    1. are prepared for external reporting purposes; and
      1. are consistent with generally accepted accounting practice for the consolidation of a group of companies for the purposes of eliminating intra-group balances.

        1. In section FE 19, the regulatory value of an item for a New Zealand banking group at a time is the total risk-weighted value for the item for the purposes of the Capital Adequacy Framework issued by the Reserve Bank of New Zealand acting in the prudential supervision of registered banks under the Banking (Prudential Supervision) Act 1989.

        Compare
        Notes
        • Section FE 20(2): amended, on , by section 300(1) of the Reserve Bank of New Zealand Act 2021 (2021 No 31).