RBNZ consults on proposed NZD70 million annual prudential levy for financial institutions

On 11 August 2026, the Reserve Bank of New Zealand – Te Pūtea Matua (RBNZ) released a consultation paper proposing a prudential levy under the Reserve Bank of New Zealand Act 2021 that would require regulated financial institutions to fund the cost of prudential regulation and supervision. The levy would apply to deposit takers (banks and non-bank deposit takers (NBDTs)), insurers and financial market infrastructures (FMIs) from mid-August 2027 and is expected to recover approximately NZD70 million annually.

The levy was announced as part of Budget 2026 to help cover the cost of prudential regulation and supervision by the RBNZ. It is one of a number of changes announced in Budget 2026 affecting the financial services sector, with the Budget also proposing updates to the thin capitalisation rules for foreign-owned New Zealand banking groups to align the tax rules more closely with banking sector prudential capital settings. You can read more about Budget 2026 in our update here.

 

The proposed levy

The consultation paper proposes a full industry cost recovery model, noting that comparable overseas regulators, including the Australian Prudential Regulation Authority (APRA), generally operate on a full or near-full cost recovery basis.

RBNZ proposes that all sectors it prudentially regulates – deposit takers, licensed insurers, and operators of designated FMIs – should contribute to the levy to recover RBNZ's costs in performing or exercising its functions or powers under prudential legislation.

If implemented, the levy would be allocated between sectors, using a proxy based on the proportion of frontline supervisory effort devoted to each sector. On this basis, RBNZ proposes that deposit takers fund 54 % of the levy, insurers 39 % and FMIs seven %. Based on the current estimate of a NZD70 million annual levy, this equates to approximately NZD37.8 million for deposit takers, NZD27.3 million for insurers and NZD4.9 million for FMIs each year.

RBNZ has proposed different allocation methodologies for each sector. Its preferred options are:

• Deposit takers: A hybrid model combining a fixed minimum levy with a variable charge based on total assets, reflecting both the baseline cost of supervising all deposit takers and the greater regulatory attention required by larger institutions.
• Insurers: A similar hybrid model comprising a fixed minimum levy and a variable component based on gross New Zealand insurance revenue, with the intention of providing a more proportionate allocation of costs across the sector.
• FMI operators: A flat allocation under which all FMI operators would contribute an equal share of the FMI sector's levy. RBNZ considers this the most equitable approach given that all designated FMIs are considered systemically important.

RBNZ is also proposing interim waivers for certain entities when the levy begins in 2027. NBDTs would pay no levy during the transitional period before RBNZ assumes supervisory responsibility for them, which is expected in late 2028. Overseas reinsurers and captive insurers would also receive an interim waiver and are expected to leave the regulatory perimeter if proposed reforms to the Insurance (Prudential Supervision) Act 2010 proceed.

 

Our view

The prudential levy would introduce a new and potentially material regulatory cost for many financial institutions operating in New Zealand. While the proposal reflects international practice, the consultation raises important questions about how costs should be allocated across sectors and individual firms, particularly for smaller participants.

The consultation also provides stakeholders with an opportunity to influence key aspects of the regime before final Cabinet decisions are made. Deposit takers, insurers and FMI operators should review the proposed allocation methodologies carefully, as the eventual design of the levy could have significantly different cost outcomes depending on the option adopted.

We do not expect the outcome of New Zealand's general election in November to materially affect the implementation of this levy. The 2026 General Election is scheduled for 7 November 2026.

 

Next steps

Submissions close at 17:00 on 16 October 2026. Final Cabinet decisions are expected in early 2027, with the levy expected to come into effect in August 2027.

Please get in touch with your usual DLA Piper expert if you would like assistance in drafting a submission.