Regulatory Alerts2022-05-17
Capital review - Three papers on the level of bank capital
The Financial Stability Office presented three informational papers to the FSO Committee to establish the baseline for its bank capital review. The documents comprise a capital modelling exercise, a historical review of New Zealand's capital settings, and a literature review on optimal capital ratios. These papers collectively demonstrate that determining a precise optimal capital level is difficult due to model assumptions and context-specific factors, with evidence suggesting wide ranges of capital settings are viable.
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