Labour MP Barbara Edmonds asked RBNZ for “specific factors and historical data.” Source: NZ Labour Party.
For well over a decade, the Reserve Bank provided the big four Australian-owned banks with a grossly unfair competitive advantage by requiring them to hold vastly less capital against equivalent loans.
A few years back, while it was still finalising its new capital requirement rules, RBNZ gave us an inkling of just how big that advantage has been.
The government-owned Kiwibank had to hold nearly twice as much capital against a vanilla home loan as ANZ Bank New Zealand, our largest bank, had to.
Why this matters is that capital levels have a significant impact on the level of a bank's profitability.
The more capital a bank has does make it safer and less likely to collapse in a crisis, but that also reduces its profitability.