Regulatory Alerts2022-05-17
Summary of Submissions to Capital Review Paper 4: How much capital is enough
The Reserve Bank of New Zealand published this document summarizing 161 submissions received regarding its proposal to set minimum Tier 1 capital requirements at 16 percent for locally-incorporated registered banks. Submitters broadly supported the objective of financial stability but debated the necessity of the increase, with major banks arguing current levels are sufficient and questioning the absence of a full cost-benefit analysis. Key points of contention included the calibration of the risk appetite framework, the assumed Modigliani-Miller offset on lending costs, and the composition of capital instruments allowed under the new rules.
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