Regulatory Alerts2022-05-17
Calibration of Leverage Ratio
The Financial Policy team recommends that the Financial Stability Committee decide on the calibration for the upcoming Capital Review consultation regarding leverage ratio requirements. The proposal offers two options: a uniform 3% minimum leverage ratio for all New Zealand registered banks, or a differentiated approach setting 3.5% for Internal Ratings-Based banks and 3% for Standardised banks to align with APRA's recent proposals. This calibration aims to serve as a backstop against risks not captured by risk-based frameworks while avoiding perverse incentives or excessive constraint on banks operating above their Tier 1 capital requirements.
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