RBNZ to Review Bank Capital Rules: What It Means for New Zealanders

Why Is the Reserve Bank Reassessing Capital Requirements?

The Reserve Bank of New Zealand (RBNZ), which is the country’s central bank, has announced that it will conduct a detailed review of how much money banks and similar financial institutions must keep aside as a safety buffer. This will be done by the end of 2025. The reason for this review is that the current rules may be too strict, making it harder for banks to lend money and for people to borrow at affordable rates.

What Are Capital Requirements?

Capital requirements are rules that tell banks how much of their own money they need to keep on hand compared to the money they lend out. This is to make sure banks stay financially healthy and can handle unexpected losses, such as during a financial crisis. For example, if a bank lends out too much and many borrowers cannot repay, the bank could fail. Having enough capital helps prevent that.

Right now, big banks in New Zealand must hold at least 13.5% of their total risk-related loans as capital. This number is planned to increase to 18% by 2028. Smaller banks have slightly lower requirements.

What's Driving the Review?

The Chair of the RBNZ’s Board, Neil Quigley, said the review will be based on facts and comparisons with other countries. The idea is to check whether New Zealand’s rules are stricter than necessary. Finance Minister Nicola Willis supports this review. She believes that overly strict rules can make borrowing more expensive for people and businesses, slow down investment, and make it harder for the economy to grow.

What Could Change for Everyday New Zealanders?

• Possibly lower interest rates: If banks don’t have to keep as much capital, they may be able to lower the cost of borrowing, meaning lower interest rates on home loans and business loans.
• More access to loans: Banks may be more willing to lend to first-home buyers or small businesses if they have fewer restrictions.
• Better economic growth: Easier lending could help create more jobs and support local businesses, boosting the overall economy.

What’s Next?

The RBNZ aims to finish this review by the end of 2025. It will work with international experts and look at the most recent financial data. The goal is to make sure the rules protect the banking system while also allowing banks to support the economy effectively.

FAQ

• Will this review definitely reduce the capital requirements? Not for sure. It depends on the findings of the review and advice from experts.
• Will it affect my current mortgage? Possibly in the future, if the review leads to lower borrowing costs.
• Is New Zealand the only country doing this? No. Many countries review their bank rules regularly to keep them fair and up to date.

Also check out:

• NZ Economy in April 2025: What Kiwis Need to Know Now
• Will New Zealand's Economy Recover in 2025?
• New Zealand Economy Update: Latest GDP Growth Insights

📌 About the Author

Kiwi Money Matters is written and maintained by a New Zealand-based writer with hands-on experience in finance and accounting since 2015.

All posts are personally researched, written to ensure clarity and trustworthiness for everyday Kiwis.