TSB Faces Independent Review Ahead of Merger Vote with Heartland Group Holdings
TSB Bank has been required to undergo an independent review of its capital and liquidity reporting ahead of a proposed merger vote, the Reserve Bank of New Zealand (RBNZ) announced. The review comes after TSB identified issues with how it calculates and reports its capital and liquidity ratios.
The RBNZ issued the notice under Section 95 of the Banking (Prudential Supervision) Act 1989, which allows the central bank to demand an outside review when it wants an independent check on a bank's operations. TSB has appointed Deloitte to conduct the review, with a final report due to the RBNZ in November.
The merger vote between Heartland Group Holdings and TSB is set to proceed despite the review, with Heartland CEO Andrew Dixson stating that they take regulatory matters seriously and will factor the findings into their view of the deal. However, he also cautioned that findings materially different from current understanding could still stop the deal completing, even if shareholders back it.
TSB has disclosed that an internal review found it had been non-compliant with a condition of its banking registration since 2010 due to issues with how it classified some funding balances. The bank also acknowledged that it calculated capital using loan-to-value ratios set at origination, rather than recalculating them each reporting period.
TSB has stated that its current liquidity and funding positions are sound, but the review is expected to focus on ongoing compliance after the merger.