Bank capital rules back in the spotlight

ASB chief executive Vittoria Shortt. Source: ASB.

At Wednesday's hearings by parliament's finance and expenditure committee (FEC), National MP Ryan Hamilton brought up the subject of the Reserve Bank's choice to calibrate bank capital to limit the chance of a bank failing to a one-in-two-hundred-year catastrophe.

Hamilton noted that most OECD countries' regulatory frameworks are aimed at limiting bank failures to a one-in-one-hundred-year phenomenon.

That was a curious decision that's worth revisiting; RBNZ first published draft decisions on bank capital requirements in December 2018, which was premised on the one-in-two-hundred-year bank crisis, the first time it publicly revealed this target.

It called for submissions to inform its final decisions.