Concentration Risk Policy¶
| Code | CRE-005 |
| Domain | Credit Risk |
| Owner | Chief Risk Officer |
| Status | Draft |
| Applicability | Platform |
| Jurisdiction | NZ + AU |
| Business domain | BD05 |
| Review date | 2027-03-25 |
Regulations: APS 220 Credit Quality · RBNZ BS2A/BS2B Capital¶
Purpose¶
Govern portfolio concentration limits to prevent excessive credit risk concentrations — by sector, geography, product type, and individual counterparty — that could jeopardise capital adequacy, regulatory compliance, or franchise stability.
Scope¶
The entire credit portfolio across NZ and AU, including both on-balance-sheet exposures and committed undrawn facilities. Covers retail, small business, and any wholesale credit exposures.
Policy statements¶
Portfolio concentration limits by sector, geography, product type, and individual counterparty SHALL be defined in the Risk Appetite Statement (GOV-002) and reviewed annually by the Board Risk Committee.
Exposures to any single counterparty or group of related counterparties SHALL not exceed the limits defined in the Risk Appetite Statement without specific Board approval. For AU operations, the large exposures framework under APRA APS 221 SHALL also be observed.
Sector concentration exposures SHALL be calculated monthly and compared against the defined limits. The results SHALL be included in the monthly credit risk dashboard presented to the CRO.
A breach of any concentration limit SHALL be escalated to the CRO within 24 hours of identification. The CRO SHALL present a remediation plan to the Board Risk Committee within 30 days of the breach.
New credit products or market segments that would materially change the portfolio composition SHALL be assessed for concentration risk impact before launch. The CRO SHALL approve any new product or segment that is projected to cause a sector or product concentration to exceed 80% of the relevant limit.
Related entity exposures — including exposures to directors, major shareholders, subsidiaries, and associates — SHALL be monitored separately and reported to the Board at each meeting. Related entity limits SHALL comply with RBNZ related party exposure standards and APRA APS 222.
Where a sector or geography experiences material stress — defined as a 12-month increase in default rates exceeding a defined threshold — the concentration limit for that sector or geography SHALL be reviewed immediately and tightened if warranted.
All concentration exposure calculations, limit breach records, and Board approvals SHALL be retained for 7 years.
Satisfying modules¶
| Module | Name | Mode | Description |
|---|---|---|---|
| MOD-066 | Collateral & security management | LOG |
Maintains the register of collateral supporting each exposure — used to calculate net exposure for concentration limit monitoring. |
| MOD-115 | Property security and LVR management | CALC |
Current LVR is calculated daily and contributes to concentration risk reporting at portfolio level. |
| MOD-147 | Related party exposure monitor | ALERT |
Related party concentrations are included in the concentration risk monitoring dashboard alongside other large-exposure alerts. |
Part of Credit Risk · Governance overview
Compiled 2026-05-22 from source/entities/policies/CRE-005.yaml