Regulatory Alerts2022-05-17
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Setting the capital ratio
The Financial Stability Office presented a framework on November 20, 2018, to determine the optimal Tier 1 capital ratio for New Zealand's banking system. The methodology identifies the capital level that caps the probability of a financial crisis while checking for remaining efficiency opportunities. The presentation recommends a Tier 1 target of 9% to 10% if the risk parameter R equals 0.3, compared to the current 7.7% of unweighted assets.
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