15 Jul 2015

Flow-on effect could hit NZ banks

1:56 pm on 15 July 2015

New Zealand bank profits could be hit if their Australian parents have to raise an extra $AU30 billion to improve their capital levels.

A bundle of New Zealand money.

Photo: RNZ / Alexander Robertson

The Australian Prudential Regulation Authority (APRA) found ANZ, the Commonwealth Bank, Westpac and National Australia Bank would have to raise their top-tier capital levels by at least 2 percentage points to be comfortably positioned within the top 25 percent of global banks.

New Zealand's major banks - ANZ, ASB, BNZ and Westpac - are Australian owned.

KPMG New Zealand head of financial services John Kensington said, if the Australian banks were forced to raise more capital, there would a flow-on effect in New Zealand.

"If the parent has to raise more capital, then if [their New Zealand units] are 10-15 percent of it, I would imagine that some of it would be allocated to these entities here, or [they] may themselves raise some capital."

Mr Kensington said New Zealand banks' capital ratios were currently well above requirements demanded by New Zealand and Australian regulators.

KPMG's Financial Institutions Performance Survey found the banking sector's profit rose by 8 percent to $1.25 billion in the first three months of the year compared with the same period a year ago, just short of the quarterly record high in September last year.

Get the new RNZ app

for ad-free news and current affairs