This review is considering whether current prudential capital requirements are set at the right level to support a stable and resilient financial system - one that enables a productive, sustainable economy and ultimately promotes the prosperity and wellbeing of all New Zealanders.
The review was announced by Reserve Bank Board Chair, Professor Neil Quigley, in March in response to inquiries by the Commerce Commission and Parliament's Finance and Expenditure Select Committee into banking competition.
Governor Christian Hawkesby says capital settings are one of the most important tools we have to protect and promote the stability of the financial system.
"However, it's essential we strike the right balance - protecting depositors and the wider economy, while supporting competition and economic efficiency," Mr Hawkesby says.
The consultation paper sets out two options for overall capital ratios, both materially reducing requirements compared with 2019 decisions.
Professor Quigley says the options are calibrated to a higher risk appetite than in our last review in 2019.
"Under the Deposit Takers Act, we will have stronger tools for supervision and crisis management, as well as additional capacity and capability as a regulator. That means we can responsibly ease capital requirements, while still protecting financial stability," Professor Quigley says.
Why we are reviewing now
The last major review, resulted in plans to increase both the quantity and quality of bank capital requirements to improve the resilience of the banking system, with full implementation by 2028. Six years on, several developments make now a good time to revisit these settings.
The Reserve Bank is in the process of moving to a new suite of prudential standards under the Deposit Takers Act 2023, alongside a new Financial Policy Remit from 2024 that places greater emphasis on efficiency and competition.
At the same time, submitters to recent inquiries have raised concerns that New Zealand's capital settings may be overly conservative compared to our international peers - potentially limiting competition and economic growth.
To inform this review, we commissioned international management consultancy, Oliver Wyman, to benchmark the capital requirements for New Zealand's largest banks against international peers. Their report found our current Tier 1 capital requirements are relatively high by international standards, but our requirements are lower than average on some other measures.
While capital requirements can influence competition and economic activity, we expect any changes from this review to have only minor impacts on overall economic output and the attractiveness of New Zealand to new entrants.
Reduction of minimum capital required for Deposit Takers
Today we also release a Summary of Submissions and Policy Decisions for the Capital Standard. This confirms technical decisions not impacted by the review and will support deposit takers' preparation for licensing under the Deposit Takers Act.
One key policy decision is to reduce the minimum capital requirement for deposit takers from $30 million to $5 million. This reduces barriers to entry.
Next steps
Submissions for the consultation close on 3 October 2025. The Reserve Bank will consider all feedback before making the final decision by the end of the year. Following consultation, three independent international experts - Thorsten Beck, Elena Carletti and Sir John Vickers - will review and challenge our analysis. They will write independent reports that will be published at the completion of the review.
"We encourage all interested parties to share their views," Governor Hawkesby says. "Robust, evidence-based feedback will help us make decisions that are in the best interests of New Zealanders, now and into the future."
We will be hosting a webinar for interested stakeholders on 2 September 2025 from 1pm to 2:30pm where we will be running through the consultation and answer any high-level initial questions.
More information
Executive summary - 2025 Review of key capital settings (PDF, 534KB)
2025 Review of key capital settings consultation paper (PDF, 1.9MB)
Summary of Submissions and Policy Decisions for the Capital Standard (PDF, 945KB)
Further to our competition agenda, in October 2025, we plan to consult on the use of the term 'bank' in name or title once the DTA comes into force.
Oliver Wyman Report - Comparing New Zealand Bank Capital Ratios to International Peers (PDF, 2MB)
Key Questions and Answers: 2025 Review of key capital settings (PDF, 125KB)
