At lunchtime I went to hear Reserve Bank Deputy Governor Geoff Bascand make the case for his boss’s proposal to require the locally incorporated banks operating in New Zealand to fund a much larger proportion of their balance sheets with equity capital. I will write tomorrow about a range of other points that were, and weren’t, made. But for now I wanted to pick up just one number he used in making the case.
In the course of his presentation, Bascand used a slide which reported the Bank’s view that these changes in capital requirements will lower the long-run level of GDP by a bit less than 0.3 per cent. I hadn’t seen the number before (maybe it was in the documents, in which case I missed it), but what struck me was Bascand’s suggestion that this is “not a very big number”.
Looked at quickly, perhaps that is true. …
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