Regulatory Alerts2022-05-17
Review of the Reserve Bank of New Zealand’s Capital Adequacy Proposals
NERA Economic Consulting, funded by Westpac New Zealand, critiques the Reserve Bank of New Zealand's proposal to raise minimum Tier 1 capital requirements for major banks from 8.5% to 16%. The authors argue the proposal lacks a proper problem definition, fails to justify the 1-in-200 year crisis probability, and prioritizes unsubstantiated soundness concerns over economic output. They conclude the changes would impose clear economic costs through reduced lending and deposit reallocation while delivering unclear benefits.
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