Regulatory Alerts2022-05-17
Regulatory impact assessment: increase in the core funding ratio to 75 percent
The Reserve Bank of New Zealand proposes increasing the core funding ratio (CFR) for locally incorporated banks from 70 percent to 75 percent to enhance financial system resilience against liquidity risks. This regulatory impact assessment estimates that the incremental cost to banks is approximately 6 basis points under normal market conditions, which is outweighed by the benefits of reduced refinancing requirements and lower crisis probability. The document further analyzes the cumulative impact of the CFR increase, its limited countercyclical effects, and its interaction with monetary policy and exchange rates.
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