After Proposal 26 was put into effect, many validators reported missing more votes than usual despite having the same oracle implementation with their prior data feed. The causes are explained here: Oracle improvement ideas - re: large increase in missing votes
Additionally, the variance in Oracle prices from different implementations / configurations; the most observable contributing factor is the Korean (aka “Kimchi”) premium (which was around 5%) for cryptoassets which are reported by some oracles, but not in others, leading to many validators missing the reward band due to the increased price variation.
Currently, the reward band is 7% - which is defined as the interval [X-3.5%, X+3.5%] where X is weighted median (reported oracle price). Validators that report prices outside of this range for any whitelisted & active denom will get their miss counters incremented by 1.
By increasing the reward band from 7% to 12%, votes within [X-6%, X+6%] interval would be included and not count toward missed votes. This would cause a slight dilution in seigniorage rewards for validators as more validators are included than usual. With everything else considered constant, this would not change the reported oracle price (weighted median), and not affect the stability mechanism.