Cost-benefit analysis, is the main method used to distinguish the more stringent application of capital liquidity laws policy option from other policy solutions. It is through this method that one can demonstrably see the rationale of why the RBNZ ought to pursue this policy over others. Certainly, one cannot account for all the policy alternatives here, no study could, but nonetheless solutions that are the most different from capital liquidity laws are examined.[1]
It may be apparent to the experienced policy reader that the placement of cost-benefit analysis after the risk assessment phase is unorthodox. This may indeed be the case; however, it should become clear as the methodology is implemented that the risks of regulating the financial sector inform, and underlie any cost-benefit analysis that could be conducted. It is essential that one knows exactly what the cost is, before further questions regarding other policy options/implementation are raised.
[1] Choosing the most different solutions from the proposed capital liquidity standards can highlight what this solution misses. Furthermore, choosing the most different solutions maximises the variety of solutions covered, thus avoiding policy ruts.