24 Dec 2013

NZ banks may have to hold more cash

1:55 pm on 24 December 2013

The Australian banking regulator is forcing the big four Australian banks to increase cash reserves by 1% from January 2016 - a move which may force the banks to hold billions of dollars more in safe financial assets.

The rules will apply to the Commonwealth Bank, ANZ, Westpac, and the National Australia Bank which own New Zealand's big four banks.

The Australian Prudential Regulation Authority says the four banks are systemically important to the Australian domestic economy.

Massey University head of banking studies David Tripe said it is likely the Reserve Bank will impose similar requirements on the Australian banks' four New Zealand subsidiaries.

Mr Tripe said having to hold more cash reserves could mean the big four banks will pay out less of their profits in dividends.