This analysis took into account New Zealand specific factors and captured household risk-aversion.18 As with findings from similar types of analysis in the international literature, there is a wide range of plausible calibrations. However, this analysis ultimately showed that a capital ratio of 18% (or 17%) is in the mid-point of our range of estimates for the ‘optimal capital ratio’ for New Zealand.
We were therefore comfortable that most, if not all, of the gains were being reaped for the economy at the 18% (or 17%) minimum capital requirement proposed from our risk-appetite framework.