Reserve Bank of New Zealand modernises capital rules and eases common equity requirements by around $5 billion

The Reserve Bank of New Zealand has announced a package of modernised prudential capital rules following a Board-commissioned review, including a recalibrated risk appetite under the new Financial Policy Remit and a reduction in system-wide common equity requirements by around $5 billion versus current settings. The package includes lower common equity requirements, more granular risk weights, simplification of capital instruments, and closer alignment of capital instruments for the four large banks with Australian settings, while further refining the risk weights consulted on in August. The RBNZ said the review took into account developments since 2019, including the introduction of the Depositor Compensation Scheme and more intensive supervision, enforcement and resolution approaches, and that small and mid-sized deposit takers should see a proportionately larger reduction than the four large banks; it also noted that submissions led to material changes, including further reductions in some risk weights. Implementation will begin on an accelerated timetable in early 2026, with full implementation under the new Deposit Takers Act planned for 2028. The RBNZ also flagged further work to refine risk weights and implement its new resolution framework and instruments, and said it will publish additional supporting material in early 2026 including a full summary of submissions, a more detailed implementation plan, technical papers and the Board paper with cost-benefit analysis.