A proposal for a new 'heartland bank' is expected to face tough regulatory hurdles.
Pyne Gould Corporation, the Canterbury Building Society and the Southern Cross Building Society are holding merger talks, with the aim of forming a bank next year.
The proposal, which is still in its early stages, would create a combined entity with 360 employees, about 70 branches nationwide and an initial asset base of $2.2 billion.
That would make it the ninth largest bank in the country, after SBS in Southland.
It would be based in the South Island and ultimately listed on the stock exchange.
Milford Asset Management partner Brian Gaynor says the criteria for gaining a banking license are tough.
He says the group will have to demonstrate it has the capital, credit rating, diversity and probity to become a bank.