Regulatory Alerts2022-05-17
Capital Ratio Calibration for the New Zealand Banking Sector
The Financial System Oversight Committee recommends setting the Tier 1 capital target between 14.5% and 16% of risk-weighted assets to ensure banking sector solvency and market confidence. The memorandum proposes maintaining Tier 2 capital at 2.0% and introducing a 3.0% leverage ratio for all banks while continuing to monitor operational and market risk buffers. These recommendations are derived from a risk appetite framework analyzing credit-related risks and economic output impacts specific to the New Zealand banking context.
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