We’ve anticipated that there will be a 20 to 40 basis point increase in bank margins in the long term as a result of these proposals.6 While these are relatively small numbers, they will ultimately have an impact on investment and spending in the New Zealand economy.
Our approach from the outset has been to set capital requirements at a level where we can be confident that these costs are outweighed by the benefits of a safer financial system. To calibrate our proposals for New Zealand, we drew on many pieces of analysis. These included international literature, stress test results and historical New Zealand data on bank losses and loan performance.