New RBNZ rules put competition at heart of banking reform

The Reserve Bank (RBNZ) has released its Competition Assessment Guidelines for Prudential Policy, outlining how competition will be embedded in future financial regulation.

RBNZ director of prudential policy Jess Rowe (pictured right) said the guidelines ensure competition considerations are factored in early during policy development.

“Competition is already a key principle we take into account when making policy decisions,” Rowe said in a media release. “These guidelines provide a clear framework for how and when competition should be considered.

“Thinking about competition early in the process helps us to explore or consider alternative ways of achieving regulatory objectives while also promoting better outcomes for competition.”

The framework sets out the key concepts that underpin competition analysis within prudential policy, supporting a sound, efficient, and competitive financial system.

Responding to Commerce Commission and Finance Minister recommendations

The publication delivers on recommendations from the Commerce Commission’s market study into personal banking services, which urged regulators to strengthen competition in retail banking.

It also aligns with the Minister of Finance’s December 2024 letter of expectations, which called for a formal competition assessment framework.

“I’d like to thank our Commerce Commission peers for their insights and suggestions as we worked to develop these guidelines,” Rowe said.

The guidelines provide a practical framework for assessing competition impacts and exploring policy options that both meet prudential goals and maintain market fairness.

Supporting Deposit Takers Act and prudential reform

RBNZ said the guidelines will play a key role in implementing the Deposit Takers Act 2023 (DTA) — a major reform unifying regulation for banks and non-bank deposit takers.

The DTA aims to modernise prudential oversight, strengthen depositor protection, and promote financial stability. Standards under the Act will be issued by May 31, 2027 and come into force on Dec. 1, 2028.

The release follows a period of significant organisational change at the RBNZ, including the creation of a new Financial Policy Committee (FPC) to enhance decision-making on prudential and financial stability matters.

The reforms also coincide with a 50-basis-point cut to the official cash rate (OCR), taking it to 2.5% — the lowest in more than three years. The Monetary Policy Committee said the decision prioritised economic recovery over near-term inflation risks, with inflation now sitting within the 1–3% target band.

What the changes mean for mortgage advisers

For mortgage advisers, the combination of a lower OCR, a competition-focused prudential framework, and a restructured regulatory model signals a new phase in New Zealand’s financial landscape.

The Competition Assessment Guidelines and Deposit Takers Act will ensure a more transparent and consistent environment for lenders and borrowers, while the Financial Policy Committee adds a layer of oversight on tools such as LVR and DTI ratios — critical to mortgage lending capacity.

With rates falling and competitive principles now formalised in policymaking, brokers can expect a more dynamic and inclusive lending environment, supporting borrower confidence and long-term financial stability.

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