Bank reforms aim to strengthen lending competition and access
The Reserve Bank (RBNZ) has welcomed the government’s formal response to the Finance and Expenditure Committee (FEC) inquiry into banking competition, saying work is already underway on several key recommendations.
“As the government response notes, some of the FEC recommendations are directed to areas where The Reserve Bank of New Zealand – Te Pūtea Matua is the decision maker,” said Angus McGregor (pictured), acting assistant governor of financial stability, in a media release.
“We see a stable, competitive and efficient banking system as a vital part of a healthy economy and we are pleased that we have already made progress on many of the FEC’s recommendations.”
The announcement follows RBNZ’s November Financial Stability Report, which found that while financial risks remain elevated amid global uncertainty, New Zealand’s banks are resilient and well-placed to support recovery even under severe stress-test conditions.
Focus on competition and regulatory balance
The FEC’s inquiry examined barriers to competition in New Zealand’s banking sector and called for greater transparency, stronger consumer protections, and improved access for smaller banks and non-bank lenders.
RBNZ said its current initiatives already align with several of these goals, including a review of bank capital settings, consultation on the use of the term ‘bank’, and leadership of a payments modernisation strategy as part of its ongoing Future of Money and Payments work.
Recent actions to strengthen financial stability
McGregor highlighted a series of recent policy steps designed to promote efficiency and resilience across the financial system.
“Recently completed work includes establishing a Financial Policy Committee to make key financial stability decisions; reducing the minimum capital requirement for deposit takers from the current $30 million to $5 million when the Deposit Takers Act comes into force; expanding access to our settlement systems; and published guidelines for managing climate-related risks,” he said.
The government’s response also emphasised the importance of ensuring smaller deposit takers and new entrants can compete effectively under the new prudential framework.
Commitment to collaboration and transparency
RBNZ confirmed it would provide regular progress updates in line with FEC’s request.
“We have noted the request from FEC for regular progress updates and look forward to contributing to that process,” McGregor said. “We are also looking forward to working with our fellow regulators and Treasury to continue to promote a financial system that supports a productive economy and the wellbeing of all New Zealanders.”
What it means for mortgage lenders and advisers
For mortgage brokers, FEC’s findings and RBNZ’s response highlight the regulator’s intent to support a more competitive and resilient banking landscape — one that could open opportunities for smaller lenders, fintechs, and non-bank players.
The RBNZ’s latest review reinforces that New Zealand’s banking system remains sound, allowing regulators to focus on reforms that improve competition and credit access without compromising stability.
Changes under the Deposit Takers Act and the capital settings review are expected to shape how lenders manage funding and risk, potentially influencing pricing, credit availability, and borrower choice in the year ahead.
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