New prudential levy: RBNZ seeks industry input

The Minister of Finance, as part of Budget 2026, announced the Government's intention to introduce a prudential levy, leveraging powers granted under the Reserve Bank of New Zealand Act 2021 (RBNZ Act).

This legislative framework explicitly allows for a levy to cover the costs incurred by the Bank in performing its critical functions and powers related to prudential supervision.

The announcement represents a decision in principle, setting the stage for a formal consultation process.

The RBNZ Act, specifically Section 296(1), mandates that the Minister must consult with all parties liable to pay the levy or those who will be significantly affected by its introduction before any regulations are recommended.

The Reserve Bank has formally agreed to conduct this consultation on behalf of the Minister, ensuring a comprehensive engagement with the financial industry.

This move underscores a strategic shift towards greater cost recovery for regulatory activities, aligning the financial burden more directly with the entities that benefit from and are subject to prudential oversight.

The consultation will be a crucial phase for stakeholders to provide feedback on the proposed structure and implementation of this new funding mechanism, which is designed to ensure the long-term sustainability and independence of the Reserve Bank's regulatory capacity.

The upcoming consultation will delve into several key areas critical for the levy's design and implementation.

Firstly, it will address the portion of costs that should be met by these levies, exploring options for either full or partial cost recovery.

This decision will significantly influence the financial impact on regulated entities.

Secondly, the consultation will define the sectoral scope of the levies, determining which specific segments of the financial industry will be subject to the new charges.

This involves careful consideration of the various types of regulated entities and their respective contributions to the financial system.

Finally, a central focus will be on the method for calculating or ascertaining the amount of the levy to be paid by individual regulated entities.

This aspect is crucial for ensuring fairness, transparency, and proportionality across the diverse landscape of New Zealand's financial sector.

The RBNZ anticipates engaging with the industry on these complex topics from late July through October 2026, gathering essential feedback to inform the final regulatory framework.

This structured approach ensures that the levy's design is robust, equitable, and minimizes unintended consequences for the stability and competitiveness of the financial system.