Comments on RBNZ's second capital review paper: What should qualify as bank capital?
The RBNZ wants to redefine capital. My comments are below.
In short: don't let perfection be the enemy of the good. The RBNZ runs the risk of achieving just what it does not want by going it alone. A DIY-definition of capital makes the Reserve Bank vulnerable to structuring. Moreover, the problems signalled by the Reserve Bank are solved by (or can be so…
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