A discussion paper published by the Reserve Bank of New Zealand on August 9 studies the effects of a stable funding requirement imposed on banks by Basel III, finding that this creates both costs and benefits.

Authors Chris Bloor, Rebecca Craigie and Anella Munro use an open-economy general equilibrium model to assess the impact of introducing a stable funding ratio. The paper finds the requirement increases a bank's reliance on long-term wholesale funding, raising the cost of credit and