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WELLINGTON, April 24 (Reuters) – The Reserve Bank of New Zealand said on Monday that it would implement a 250% risk weigh for bank investments in the Business Growth Fund (BGF) down from the current 400%.
Announced last year, the Business Growth Fund helps small and medium businesses access finance, and the fund is part of a government plan to grow businesses that would otherwise not be able to access funding.
The central bank said that a 400% risk weight investment applied for investing in an entity but because of the diversification benefits of the BGF the risks are likely to be lower than investing in a single entity.
Risk weights are used to covert a bank’s exposure into a risk-weighted assets and banks are required to hold capital against these liabilities.
(Reporting by Lucy Craymer; Editing by Lisa Shumaker)
((Lucy.Craymer@thomsonreuters.com;))
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