It is clear that many issues intersect with overarching question of whether the Reserve Bank of New Zealand should implement more stringent capital liquidity standards. One can note that the question only addresses the policy response of capital liquidity standards to begin with and, therefore, narrows the policy options to those concerning regulatory methods. This in turn assumes that we do indeed have a problem that requires some kind of solution. The idea of implementing more stringent regulation in an economic sense, therefore, grounds the debate in two opposing schools of economics one advocating deregulatory, market based solutions, and the other advocating regulatory, state based responses to perceived problems (Le Heron, 2003: 3). After such issues have been addressed, if regulation is still suitable, then the regulation proposed must also be proportional to the perceived problem at hand. The appropriateness of stringency merits asking the question of how would one would modify the current system so it was more stringent; should the RBNZ simply change the ratio of capital to risk, or is another agency/policy tool more appropriate for such a policy change? The appropriateness of making capital liquidity regulation more stringent, therefore, brings a milieu of questions to the fore. One can note that these distinct issues exist:
- What problem does capital liquidity standards (a more stringent application thereof) address?
- Are regulatory responses to economics issues, in particular financial issues appropriate?
- Would a more stringent capital liquidity law be proportional to the problem at hand?
- How can one make the capital liquidity laws more stringent? Is the problem one of legislation outputs, or the noneffectiveness of legislative outcomes?