RBNZ opens prudential levy consultation targeting $209m recovery

The Reserve Bank of New Zealand opened formal consultation on 11 August 2026 on a prudential levy estimated to recover about $209 million over three years. Submissions close at 5pm on 16 October 2026.

The levy would shift funding of the Bank’s prudential function onto regulated entities. Deposit takers, insurers and financial market infrastructures would pay. Monetary policy and currency work would stay outside the levy under the Five Year Funding Agreement.

NZ Banking Association chief executive Roger Beaumont said banks understand the need for appropriate regulator funding. He said banks will engage constructively so the levy is appropriate, effective and well targeted.

Finance Minister Nicola Willis announced the in-principle decision in Budget 2026 on 28 May. Sections 293–296 of the Reserve Bank of New Zealand Act 2021 empower the levy. The Minister must consult before recommending regulations.

Indicative recoverable costs, GST-exclusive, are $68.1 million in 2027/28, $69.5 million in 2028/29 and $70.9 million in 2029/30. That averages about $70 million a year.

The consultation paper proposes full cost recovery for prudential work. Sector shares based on frontline supervisory effort are deposit takers 54%, insurers 39% and FMIs 7%.

Those shares imply three-year sector bills of about $113 million for deposit takers, $81 million for insurers and $15 million for FMIs. Revenue would flow to the Reserve Bank and return to the Crown via a larger dividend.

Entities in scope include 27 registered banks, 14 licensed non-bank deposit takers, 81 licensed insurers and five designated FMIs. The Bank expects to designate three more FMIs.

Who pays what inside deposit taking

Within deposit taking, the paper canvasses four calculation options. These range from a flat per-entity share of about $922,000 across 41 entities, to asset-band models, a pure average-total-assets rate, and a hybrid fixed-plus-rate design.

Under an illustrative pure asset rate, locally incorporated deposit takers would face about 0.0052452% of average total assets. Branches would pay one-fifth that rate. A $200 billion local bank would pay about $10.5 million; a $100 billion bank about $5.25 million.

The hybrid option includes indicative fixed components of $50,000 for locally incorporated entities and $10,000 for branches, plus a residual asset rate. Insurers would use premium or revenue metrics. FMIs would face a flat equal rate.

Treasury’s Stage 1 Cost Recovery Impact Statement supported full recovery. It cited externality theory and international practice. Method 1 costing for 2027/28 shows direct people costs of $23.3 million against overhead allocation of $43.9 million.

Budget origin and political signals

Willis said the levy ensures regulation and supervision costs fall on financial market players rather than taxpayers. She said it mirrors FMA and Commerce Commission funding and aligns with Australia, Canada and the United Kingdom.

This levy will ensure the cost of regulation and supervision is borne by financial market players rather than taxpayers.

Government notes state the levy would be less than 1% of the big four banks’ combined profits alone. RBNZ figures show the four Australian-owned banks account for about 84% of New Zealand bank lending.

Willis warned banks it would be extremely unwise to pass costs to customers. She said she would be extremely disappointed if New Zealand banks chose to do that. She pointed to competition and Reserve Bank price monitoring as checks.

I would be extremely disappointed if at this time, New Zealand banks chose to do that to their customers.

ACT leader David Seymour said banks have only one source of money — their customers. Labour finance spokesperson Barbara Edmonds supported user-pays in principle but said she would watch carefully for customer pass-through.

Cumulative levy stack and international context

Deposit takers already face Depositor Compensation Scheme levies of about $80–85 million a year. A proposed AML/CFT industry levy could add about $23 million for banks. FMA levies and Deposit Takers Act compliance costs stack further.

Treasury’s CRIS places New Zealand’s proposed about $70 million, or roughly $14 per person, near Australia’s about $13 per capita and well below Ireland’s financial-centre intensity. APRA is almost entirely industry-funded.

Beaumont’s public line remains constructive engagement. He said banks understand the need for appropriate funding for regulators and will work to keep the levy appropriate, effective and well targeted.

Banks will engage constructively with the Reserve Bank in the consultation process to help make the levy appropriate, effective, and well targeted.

Cabinet decisions are targeted for early 2027. Regulations are aimed at June–July 2027. The levy would take effect from August 2027. It would be calculated yearly in arrears, reviewed on a five-year cycle aligned to the FYFA, and attract GST.

Industry submissions will test full versus partial recovery, overhead intensity, branch discounts and flat FMI shares. Small NBDTs and portfolio insurers are expected to press proportionality. Households and businesses will watch whether any retail pricing moves are attributed to the levy once invoices begin in mid-2027.