Regulatory Alerts2022-05-17
Reserve Bank of New Zealand Capital Review: Cost Benefit Analysis and External Expert Reports
The Reserve Bank of New Zealand's Financial Policy team presents a draft Cost Benefit Assessment concluding that proposed higher capital requirements yield net benefits by increasing financial system soundness more than they reduce GDP through higher interest rates. The memorandum also outlines the communications plan for publishing final reports from three External Experts who generally endorsed the review's quality and direction while identifying specific areas for further analysis. Additionally, the document addresses stakeholder concerns regarding the calibration of the Internal Ratings Based approach, estimating that mortgage capital requirements for large banks would remain approximately 90 to 96 percent of those for Standardised banks under the proposed framework.