Regulatory Alerts2022-05-17
Background notes on capital review
The Reserve Bank of New Zealand issued these background notes to justify a review of the banking capital framework, citing that internal models have failed to align regulatory capital with genuine risk exposures. The regulator aims to establish a robust and fair system that eliminates unjustified competitive advantages while ensuring capital levels are calibrated to New Zealand's specific risk profile. Evidence presented indicates that higher capital requirements impose minimal costs on GDP, allowing for increased safety without significantly harming lending or profitability.
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