By Lucy Craymer
WELLINGTON (Reuters) - New Zealand's central bank said on Tuesday it does not agree with the assessment of the country's competition watchdog that its prudential capital settings need to be reviewed.
In March, a draft Commerce Commission report found that there was limited competition in New Zealand's personal banking sector and one of its recommendation was that the central bank review its capital setting requirements.
Since 2008, the Reserve Bank of New Zealand has allowed larger banks to hold significantly less capital than smaller banks for some lending giving them in some cases a competitive advantage, according to the Commerce Commission.
RBNZ Deputy Governor Christian Hawkesby said the current bank capital framework is the result of a careful and extensive review process that occurred recently and is still being phased in.
"The Commission’s suggested changes to our risk-weighting framework in the draft report would lead to very marginal benefits to competition, and could have unintended consequences and put us out of step with international regulatory approaches," Hawkesby said.