17.12.202500:02:30UTC+00RBNZ Lowers Capital Requirements for Banks

New Zealand's central bank revealed on Wednesday that it is set to adjust some of the banking sector's capital requirements based on a review of the 2019 regulations. These requirements will remain higher than the global standard. The top four Australian-owned banks in the country must now maintain a common equity tier 1 capital—considered the highest quality capital—at 12%, a decrease from the previous 16%. However, tier 2 capital requirements will see an increase from 2% to 3%. Additionally, these banks are mandated to sustain an internal loss absorbing capacity of 6%, according to a document released by the Reserve Bank of New Zealand (RBNZ) referenced by Reuters. For smaller banks, the total capital requirement will drop to 14% from 16%, though the document clarifies that these changes are still "relatively conservative when compared internationally." RBNZ Governor Anna Breman remarked that "these new settings will reduce the overall cost of deposit takers' funding. We anticipate that this will translate into advantages for New Zealanders through enhanced lending and lower rates."