NEW ZEALAND BUSINESS NEWS
Empowering Kiwi Businesses
The Reserve Bank has received 48 submissions on the Government’s proposed prudential levy, a user-pays charge on the financial firms it regulates. The consultation ran from 11 August to 16 October and drew responses split almost evenly between the deposit-taking and insurance sectors.
Finance Minister Nicola Willis announced the levy in May as part of Budget 2026. It would recover the cost of the Reserve Bank’s supervisory services from the institutions that use them: registered banks and other deposit takers, licensed insurers, and the operators that clear, settle and record payments and transactions.
New Zealand has 27 registered banks, 14 licensed non-deposit takers, 81 licensed insurers and five designated financial market infrastructure providers, according to the Government.
Of the 48 responses, 21 focused primarily on the deposit-taking sector and 21 on insurance. Five addressed financial market infrastructures, and one came from an unattributed sector.
The Reserve Bank is now working through the feedback and intends to publish both a summary and the full submissions, with personal or commercially sensitive material redacted. The Reserve Bank expects to publish that in early 2027.
The scale of the charge varies sharply by size. A consultation paper issued in August put the total take at $209 million over three years. Deposit takers would carry $113 million, or 54 per cent of the total; insurers $81 million, or 39 per cent; and financial market infrastructures $15 million, or 7 per cent.
The allocation is based on total assets as at 30 June. ANZ NZ, the country’s largest bank with $216 billion in assets, would pay up to $12 million a year. BNZ, ASB and Westpac NZ, each holding between $132 billion and $145 billion, would pay around $7 million each annually.
Kiwibank, with $45 billion in assets, would face roughly $2.5 million a year. Among insurers, IAG NZ, the country’s largest, could pay more than $5 million annually.
In a sector where margins are measured in basis points, these amounts are large enough to matter at board level, but small enough that recovering them from customers is not straightforward. That is the tension at the heart of the consultation: the levy is designed to shift the cost of regulation onto the regulated, but the regulated have customers who ultimately fund the bill.
Treasury’s impact statement describes the effect of institutions passing the levy on to customers as modest. Full pass-through would lift the cost of borrowing by less than 1 basis point and insurance premiums by less than 0.2 per cent on average.
In practice, that means a business borrowing at typical SME rates would see little change in repayments, and premium increases would be measured in tenths of a per cent rather than whole percentage points. The larger question for borrowers and policyholders is whether firms absorb the levy instead, which would show up in lending appetite and pricing rather than in a line item.
The levy does not change how the Reserve Bank carries out its supervisory role. It changes how that role is funded, shifting the cost from the Crown’s balance sheet to the institutions being supervised.
The Reserve Bank is analysing the 48 submissions. The Reserve Bank will publish the summary and redacted submissions in early 2027, showing how far the sector pushed back on the allocation between banks, insurers, and market infrastructure, and whether the design changes before the levy is set.
Until then, the figures in the August consultation paper stand as the working estimate: $209 million over three years, weighted towards the banks that hold most of the country’s assets.
NZ Business News reports on the decisions, deals and numbers shaping New Zealand business — the companies making them, the policy and market conditions they work within, and what it means for the people running businesses here.