With a lone active banking registration application under review, the push for new competition in NZ’s banking sector inches along at a snail’s pace

Nearly a year after the Parliamentary inquiry into banking competition released its final report, there is just one active banking registration application seeking Reserve Bank (RBNZ) approval to become a bank.

According to the RBNZ, it is currently considering one full banking registration application and two applications seeking non-bank deposit taker (NBDT) licences. 

Banking applications come under the jurisdiction of the Banking (Prudential Supervision) Act 1989 while NBDT applications fall under the Non-bank Deposit Takers Act 2013.

“For commercial reasons, we do not release the names of entities engaged in the application process. Once an entity becomes licensed/registered, we publish their name on the relevant register on our website,” an RBNZ spokesperson said.

British-headquartered fintech Revolut has been in the process of obtaining banking registration from the RBNZ since 2024 and has remained tight-lipped on its application status.

Revolut received an Australian banking licence in July and also received a full UK banking licence in March earlier this year.

After the fintech secured the Australian banking licence, Revolut’s NZ head Georgia Grange told interest.co.nz in a statement that the focus of Revolut’s NZ arm “remains firmly” on progressing its NZ application to become a locally registered bank.  

“Securing a New Zealand banking licence remains an important part of our long-term strategy and commitment to the market,” she said. 

New NBDT

In addition to the above active applications, the RBNZ said it had recently approved a new NBDT application and plans to publish the entity’s name in due course.

Interest.co.nz understands this approved NBDT application belongs to Oxbury, a UK agricultural lender that is setting up a NZ subsidiary and has recently been granted an NBDT licence by the RBNZ.

Registering as a bank allows a financial institution to take retail and wholesale deposits, provide lending and credit services and use banking language. Registering as an NBDT allows a financial institution to also offer these services, but under current legislation, NBDTs cannot call themselves a bank or use words like “bank” or “banking.”

That is all set to change, however. The RBNZ announced earlier this year that, because of regulatory changes to the Deposit Takers Act (DTA), from December 1, 2028, all deposit takers the RBNZ licences, including building societies, credit unions and finance companies, will be able to call themselves “banks.”

The change is part of the rollout of the DTA, which will be fully implemented by December 2028. The new framework will oversee the regulation of all banks and NBDTs in NZ under a single prudential regime. 

The $30 million handbrake

To apply for banking registration, a fee of $21,000 applies to either an NZ-registered bank or a branch or subsidiary of an overseas bank. It costs $36,000 for all other applications.

The RBNZ also requires banks to have an absolute minimum of $30 million of regulatory capital, which financial institutions have to prove when they apply for banking registration. This is because bank capital is funding first in line to absorb any losses banks may incur.

Parliament’s Finance and Expenditure Committee urged the RBNZ in August last year to stop further bank capital increases, saying they were raising borrowing costs and suppressing competition.

That same month, the RBNZ announced a proposal that was later confirmed to lower the minimum capital requirement for deposit takers from $30 million to $5 million, with a scheduled date of 2028. 

An RBNZ spokesperson confirmed to interest.co.nz this is still scheduled for 2028. However, they said if an entity applies for a full banking licence under the Banking (Prudential Supervision) Act 1989 before that date, they will still need to meet the $30 million capital requirement.

Asked if the RBNZ had paused processing banking applications until the DTA is completely implemented by the end of 2028, the RBNZ said no.

“Applications for licences under the Deposit Takers Act open from 1 June 2027, and priority will be given to applications from existing regulated banks and NBDTs. We will continue processing applications under the current regime until that time,” the RBNZ spokesperson said in response.

All entities licensed under the current regime will need to be relicensed under the DTA by December 2028.

According to the RBNZ’s bank register on its website, there are 27 registered banks and 14 licensed NBDTs in NZ. The RBNZ said it does not have historical data going back 10 years on the number of institutions that have applied for and been approved for banking registration.

The RBNZ told interest.co.nz that entities qualify for registration if they meet the requirements of section 73 of the Banking (Prudential Supervision) Act, which states what it means to be a bank (i.e. the type of business undertaken) and the prudential requirements a bank must comply with. 

“A bank application can fail if an applicant does not fall within the meaning of a bank or if it is unable to comply with the prudential criteria listed in section 73, or both,” the spokesperson said. 

“Over the last five years we have declined one application for an entity seeking to become a registered bank. For commercial reasons, we do not release the names of entities engaged in the application process or comment on the details of specific applications.”

The RBNZ turned down NZ fintech Dosh’s bank registration application last year because it didn’t see Dosh’s proposed banking model as viable under the current legislation.

Dosh co-founder Shane Marsh told interest.co.nz Dosh is considering “the best way forward” for the business following that decision and is still undecided on whether it will pursue another banking registration application. Instead, the fintech could wait until 2028 when the new DTA framework is implemented and the capital requirements for banking registration change from $30 million to $5 million.

Emerge, another NZ fintech that wants to become a challenger bank, has also previously expressed “clear aspirations” to gain RBNZ approval to become a registered bank. But Emerge co-founder Jovan Pavlicevic told interest.co.nz this week that Emerge hasn’t yet submitted a formal application for bank registration.

“We have, however, been in ongoing discussions with regulators and policy makers about the potential pathways available to Emerge,” he said.

Last year, Parliament’s Finance and Expenditure Committee found NZ's banking sector lacked strong rivalry and the RBNZ’s capital rules hurt rural borrowers and smaller lenders. 

This assessment came after a 14-month inquiry into banking competition where the committee heard from a range of major commercial banks, financial regulators and public submitters.

The Parliamentary inquiry into banking competition followed the Commerce Commission’s competition market study into personal banking services in 2023 and 2024, which found NZ’s banking sector had a “stable oligopoly with no maverick provider.”

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