Regulatory Alerts2022-05-17
Background paper on MaPP transmission channels
The Reserve Bank of New Zealand issued this background paper to analyze the transmission mechanisms of four proposed macro-prudential policy instruments: adjustments to the minimum core funding ratio, the counter-cyclical capital buffer, sectoral capital requirements, and restrictions on high loan-to-value ratio lending. The document details how tightening these tools aims to build financial system resilience and dampen excessive credit and asset price cycles by directly affecting bank buffers and indirectly influencing borrower leverage and market expectations. It further evaluates potential effectiveness, behavioral impacts, and risks such as financial disintermediation or unintended consequences associated with implementing these time-varying regulatory measures.