Regulatory Alerts2022-05-17
Regulatory Impact Assessment on Asset Class Treatment of Residential Property Investment Loans
The Reserve Bank of New Zealand proposes separating residential property investment loans from owner-occupier mortgages into a distinct asset class to align capital requirements with their higher risk profiles. This change aims to address Basel III inconsistencies for internal models banks, mitigate financial stability risks associated with housing market downturns, and facilitate future macro-prudential restrictions. The assessment evaluates multiple policy options, including a count-based threshold, to determine the most effective approach for ensuring adequate capital backing without imposing unnecessary costs.
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