The Reserve Bank of New Zealand has published a consultation paper for its 2025 review of key prudential capital settings, assessing whether current requirements are set at the right level. The paper presents two options for overall capital ratios, both of which would materially reduce requirements compared with the Reserve Bank’s 2019 decisions. The review, announced in March in response to inquiries into banking competition by the Commerce Commission and Parliament’s Finance and Expenditure Select Committee, is being undertaken alongside the transition to a new suite of prudential standards under the Deposit Takers Act 2023 and a 2024 Financial Policy Remit that places greater emphasis on efficiency and competition. To inform the reassessment, Oliver Wyman benchmarked capital requirements for New Zealand’s largest banks against international peers and found Tier 1 capital requirements are relatively high by international standards, although lower than average on some other measures. Separately, the Reserve Bank also released a Summary of Submissions and Policy Decisions for the Capital Standard confirming technical decisions not affected by the review, including reducing the minimum capital requirement for deposit takers from NZD 30 million to NZD 5 million to lower barriers to entry. Submissions on the consultation close on 3 October 2025, with a final decision expected by the end of the year. After consultation, three independent international experts, Thorsten Beck, Elena Carletti and Sir John Vickers, will review and challenge the analysis and publish independent reports at the completion of the review, and the Reserve Bank will host a stakeholder webinar on 2 September 2025. It also plans to consult in October 2025 on the use of the term “bank” in a name or title once the Deposit Takers Act is in force.

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