Regulatory Alerts2022-05-17
Regulatory Impact Assessment of Stage One Housing Loan Capital Review
The Reserve Bank of New Zealand issued this assessment to implement higher capital adequacy requirements for housing loans, specifically increasing the correlation factor in the Basel II equation to better reflect systemic risk. The preferred Option One raises risk-weights for high loan-to-value loans, resulting in an estimated 12 percent average increase in regulatory capital for affected banks. The regulator concludes that these measures properly align capital with risk, with minor short-term cost increases to borrowers outweighed by improved financial system stability.
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