The Reserve Bank of New Zealand – Te Pūtea Matua (RBNZ) has released a consultation paper proposing a prudential levy under the Reserve Bank of New Zealand Act 2021.
The levy would shift the cost of prudential supervision from the RBNZ’s existing funding arrangements to the deposit takers, insurers, and financial market infrastructure (FMI) operators it regulates.
Depending on the approach that is taken to the levy, it could create significantly increased compliance costs for these financial institutions. The proposed levy would recover approximately NZ$70 million per annum (NZ$209 million over three years) from regulated entities.
RBNZ is consulting on the proposed levy and has set out various options for how the levy could be imposed.
Background on the consultation
The Government has agreed in principle to implement a prudential levy to fund the RBNZ’s prudential function. Currently, those costs are met from the RBNZ’s own revenue under its Funding Agreement with the Minister of Finance. The proposed levy would replace those arrangements for prudential regulation, shifting the funding burden to the entities that benefit from RBNZ supervision. The RBNZ’s central banking function would not be funded through the levy.
The levy would require regulations to be made. They are proposed to take effect around August 2027, and the first levy would be collected for FY2027/28.
Proposed costs and allocation
The RBNZ estimates recoverable costs of NZ$68.1 million for FY2027/28, NZ$69.5 million for FY2028/29 and NZ$70.9 million for FY2029/30 – averaging approximately NZ$70 million per annum and totalling NZ$209 million over three years. These figures exclude GST which would be collected on top of these amounts.
The proposed allocation of the total levy between sectors is based on an estimate of frontline supervisory effort, resulting in the following allocation: deposit takers 54%, insurers 39%, and FMI 7%. Over three years, this translates to approximately NZ$113 million for deposit takers, NZ$81 million for insurers, and NZ$15 million for FMI operators.
What could this mean for deposit takers?
The RBNZ’s preferred option for deposit takers is a hybrid model combining a fixed amount and a rate component based on total assets. Locally incorporated deposit takers would pay a NZ$50,000 fixed component and branches would pay a NZ$10,000 fixed component. The illustrative rate for the remainder of the levy is 0.0047593% of total assets.
For instance, a locally incorporated deposit taker with NZ$200 billion in assets would pay approximately NZ$9.6 million; and a branch with NZ$5 billion in assets would pay approximately NZ$248,000.
What could this mean for insurers?
The preferred option for insurers is a similar hybrid model, with a NZ$30,000 fixed component for all insurers plus an illustrative rate component of 0.13749% of gross NZ revenue.
This would mean the levy for an insurer with NZ$4 billion gross NZ revenue would be approximately NZ$5.5 million, and the levy for an insurer with NZ$1 million gross NZ revenue would be approximately NZ$31,000.
What could this mean for financial market infrastructures?
The RBNZ proposes levying FMI operators a flat dollar amount of approximately NZ$1.23 million per operator.
Exemptions and transitional arrangements
The RBNZ does not propose any sector or sub-sector exemptions or any minimum size threshold. However, transitional waivers are proposed for non-deposit bank takers to avoid double-charging while trustee supervision continues under the existing regime and for overseas reinsurers and captive insurers, who are not expected to be supervised by RBNZ from late 2028.
Implementation approach and methodology
Levies would be calculated annually in arrears after the RBNZ financial year ending 30 June, based on actual recoverable costs, industry membership and industry data. The RBNZ proposes specifying the calculation methodology in regulations rather than fixed values, with the methodology reviewed at least every five years. The RBNZ has indicated that further consultation on draft regulations is not proposed.
Consultation
Submissions on the consultation paper are due by 16 October 2026. The RBNZ is consulting on behalf of the Minister of Finance, and Cabinet will make final decisions following the consultation.
We intend to make our own submission and look forward to receiving comments and questions from interested parties.
If you have any questions about the matters raised in this article, please get in touch with the contacts listed or your usual Bell Gully adviser.
Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
