RBNZ Banking Supervision Handbook: BS4 Audit Obligations¶


Regulator	Reserve Bank of NZ
Jurisdiction	NZ
Status	live
Applicability	Platform

BS4 is the RBNZ Banking Supervision Handbook standard governing the credit risk standardised approach for registered banks. It prescribes risk weights for each asset class used in calculating risk-weighted assets (RWA) for credit risk capital purposes. Key risk weights include: residential mortgage loans at 35% (LVR ≤80%) or 100% (LVR >80%), qualifying revolving exposures at 75%, corporate exposures at 100%, and OECD sovereign exposures at 0%. Credit conversion factors (CCF) are applied to off-balance-sheet commitments to calculate credit-equivalent exposures.

BS4 is used by registered banks that have not obtained RBNZ accreditation for the internal ratings-based (IRB) approach under BS2B. Totara Bank will use the standardised approach.

BS4 is being superseded by the DTA Capital Standard, which takes effect 1 December 2028 and modernises the credit risk standardised approach in line with the Basel III finalisation package. Until that date, BS4 remains operative.

Compliance register¶

This register maps every material obligation under BS4 to the platform control or institutional process that satisfies it. It is the static traceability layer for the Totara compliance report — dynamic data (module build status, test evidence, control test dates) is overlaid at runtime.

Scope legend¶

Symbol	Meaning
🤖 Automated	Platform enforces or performs the obligation. Primary control mode is GATE, AUTO, CALC, or ALERT. Human action is not required in the normal case.
📊 Evidenced	Platform captures the evidence trail automatically. Human compliance decision sits on top. Primary control mode is LOG.
🏛 Institutional	Obligation is met by a process entirely outside the platform — board governance, credit committee, legal. Platform may generate evidence inputs but does not own the process.
N/A	Obligation does not apply to this deployment configuration.

Build legend¶

Symbol	Meaning
✅	Module built and deployed
🔨	Module planned — not yet built (`build_status: Not started`)
❌	Uncontrolled gap — no module attributed

Asset class risk weights¶

Ref	Obligation	Scope	Policy	Platform controls	Build
BS4 §3	Residential mortgage — apply 35% risk weight where LVR ≤80%; 100% where LVR >80%	🤖 Automated	CRE-001	MOD-033 (CALC) — RWA computed using standardised risk weights, with residential mortgage risk weight determined by current LVR; MOD-115 (GATE) — loan cannot settle without LVR calculated within policy limits, protecting the 35% risk weight tier	🔨
BS4 §3	Qualifying revolving exposures (credit cards, overdrafts) — apply 75% risk weight	🤖 Automated	CRE-001	MOD-033 (CALC) — revolving facility product type mapped to qualifying revolving class; 75% risk weight applied automatically from product attribute classification	🔨
BS4 §3	Corporate exposures — apply 100% risk weight	🤖 Automated	CRE-001	MOD-033 (CALC) — corporate counterparty attribute applied at origination; 100% risk weight assigned to all unrated corporate exposures	🔨
BS4 §3	OECD sovereign and central bank exposures — apply 0% risk weight	🤖 Automated	CRE-001	MOD-033 (CALC) — sovereign asset class assigned from counterparty country code and OECD membership flag; 0% risk weight applied automatically	🔨
BS4 §3	Banks and financial institutions — apply risk weights based on external credit rating or standardised approach	🤖 Automated	CRE-001	MOD-033 (CALC) — interbank and financial institution counterparties risk-weighted by external credit rating where available; standardised claim class applied where no rating exists	🔨
BS4 §3	Past-due exposures (>90 days) — apply 150% risk weight (net of specific provisions)	🤖 Automated	CRE-001	MOD-033 (CALC) — arrears flag triggers past-due risk weight uplift automatically when an exposure breaches the 90-day threshold	🔨

Credit conversion factors (off-balance-sheet)¶

Ref	Obligation	Scope	Policy	Platform controls	Build
BS4 §4	Apply 100% CCF to direct credit substitutes (guarantees, letters of credit)	🤖 Automated	CRE-001	MOD-033 (CALC) — off-balance-sheet commitments classified by facility type; 100% CCF applied to direct credit substitutes automatically	🔨
BS4 §4	Apply 50% CCF to transaction-related contingent items	🤖 Automated	CRE-001	MOD-033 (CALC) — transaction-related contingent items identified from product type and 50% CCF applied	🔨
BS4 §4	Apply 20% CCF to short-term, self-liquidating trade-related contingencies	🤖 Automated	CRE-001	MOD-033 (CALC) — trade finance facility type drives 20% CCF assignment	🔨
BS4 §4	Apply 0% CCF to undrawn commitments unconditionally cancellable at any time	🤖 Automated	CRE-001	MOD-033 (CALC) — unconditionally cancellable flag applied at origination; 0% CCF assigned to these facilities	🔨

LVR monitoring and risk weight protection¶

Ref	Obligation	Scope	Policy	Platform controls	Build
BS4 §3	Maintain current LVR data to support ongoing correct risk weight assignment for residential mortgages	🤖 Automated	CRE-001, CRE-005	MOD-115 (CALC) — LVR recalculated daily using current drawn balance against most recent property valuation; risk weight input to MOD-033 updated without manual intervention	🔨
BS4 §3	Revalue collateral when LVR approaches the 80% threshold to verify correct risk weight	🤖 Automated	CRE-001	MOD-115 (ALERT) — valuation review triggered automatically when portfolio-level or loan-level LVR approaches the 80% risk weight boundary	🔨

RWA reporting under BS4¶

Ref	Obligation	Scope	Policy	Platform controls	Build
BS4 §6	Report credit risk RWA by asset class in the RBNZ prudential return	🤖 Automated	CRE-001	MOD-036 (AUTO) — RBNZ BS return populated with credit risk RWA disaggregated by asset class from MOD-033; no separate manual extraction	🔨
BS4 §6	Disclose credit risk RWA and risk weight distribution in quarterly disclosure statements	🤖 Automated	CRE-001	MOD-036 (AUTO) — disclosure tables populated from MOD-033 output via the return data pipeline	🔨

Institutional obligations (not platform scope)¶

Obligation	Owner	Platform evidence input
Credit policy approval covering acceptable asset classes and risk weight methodology	Board Credit Committee	MOD-033 provides live RWA distribution by asset class
External auditor review of RWA methodology and capital adequacy disclosure	External Auditor	MOD-036 provides data lineage from loan origination to RWA figure
IRB accreditation decision (if applicable in the future)	CRO / CEO / RBNZ	Not applicable in current programme — standardised approach only

Coverage summary¶

Area	Total obligations	Platform automated 🤖	Platform evidenced 📊	Institutional 🏛	N/A
Asset class risk weights	6	6	0	0	0
Credit conversion factors	4	4	0	0	0
LVR monitoring	2	2	0	0	0
RWA reporting	2	2	0	0	0
Total	14	14 (100%)	0 (0%)	0 (0%)	0 (0%)

All attributed modules are currently build_status: Not started. The DTA Capital Standard (effective 1 December 2028) supersedes BS4 — see nz-dta-capital for the forward obligation register.

Policy	Title
CRE-001	Credit Risk Management Policy
CRE-005	Concentration Risk Policy

See D02 Credit Risk for the full risk domain.

Official documentation¶

Policies referencing this standard¶

(None yet)

Compiled 2026-05-22 from source/entities/regulations/nz-bs4.yaml