Banks in New Zealand will be unaffected by international banking regulation changes requiring banks to hold more capital - rules introduced in order to stave off a repeat of the financial crisis which prompted the bailing-out of banks in crisis.
Globally, banks will be in a stronger position having to hold more capital, but the corollary is they will have to be more prudent when lending, making credit more difficult to obtain.
The core Tier 1 ratio; the amount of capital held by banks, will be increased from 4% to 7% (which includes a capital conservation buffer of 2.5%) while total Tier 1 capital will rise to 10.5%.
The regulation changes, known as Basel III, were announced last weekend by Switzerland-based Basel Committee on Banking Supervision, comprised of 25 countries' representatives meeting quarterly, whose recommendations cover countries in the Organisation for Economic Co-operation and Development.
While banks in Australia and New Zealand are unlikely to be affected, European and United States banks might have to go to the markets to raise further equity to fulfil the requirements.
Craigs Investment Partners broker Chris Timms said the Australian banks, and therefore all of the major New Zealand banks owned by Australian interests, are already operating above the Basel III requirements.
"There will be no need for capital-raising. The major [Australian] banks currently hold 8.6% to 11% of common equity [core Tier 1] and 11.4% to 13.5% [total Tier 1] levels," he said yesterday.
The United States and European markets responded positively to the Basel III announcement earlier in the week, with bank stocks making gains on the back of longer-than-expected time frames for banks to comply with Basel III requirements - over three years to January 2019.
Research by Forsyth Barr said the Basel global regulators agreed to force banks to more than triple their Tier 1 capital reserves, hoping to prevent another credit crisis.
However, the new rules provide transition periods which could extend to January 2019 or later, longer than many had expected.
In Europe, shares hit their highest close since April, as bank stocks surged on relief that new capital rules were not more demanding.
Mr Timms said banks in Asia, India and China were similar to those in Australia: already being well-capitalised, but it was the US and European - especially German - banks facing equity-raising to comply.
"The implications are the restrictions on banks' borrowings; because they have to have more capital, which in turn means taking a more prudent approach," he said.
