Reserve Bank to lay out its case for changes to New Zealand’s payments system this month, Assistant Governor Angus McGregor says

The Reserve Bank (RBNZ) will publish a paper on proposed changes to New Zealand's payments system later this month and its work on the future of banking next month, RBNZ Assistant Governor of Financial Stability Angus McGregor says.

The Government last year endorsed a recommendation from the parliamentary select committee banking inquiry to "push for real-time payments," calling on banks to; "invest in global standard, next-generation payment infrastructure to work towards real-time payments at a national and international level."

Finance Minister Nicola Willis endorsed the RBNZ to lead the development of a payments modernisation strategy, and the RBNZ has been developing a strategy to modernise the retail payments system, but has said it wants the private sector to lead the work.

Speaking at the Financial Services Council conference in Auckland on Thursday morning, McGregor said NZ’s retail payments system is reliable, but needs to evolve to meet the expectations of a modern economy, with faster, more efficient, innovative and resilient ways for New Zealanders to make and receive payments.

"Later this month, the Reserve Bank will publish an issues paper that makes the case for changes to New Zealand’s payments system, and we will be seeking feedback on the key issues we have identified," McGregor said.

He said this work is not just about payments infrastructure, it was about thinking ahead to the financial system NZ will need in the years to come.

Separately McGregor said the RBNZ has been looking into the future of banking.

"The purpose of us undertaking that piece of work was to really help us better understand what might the world look like in 2035. What might the banking sector look like in 2035? If we think it's going to look the same, you know, we're kidding ourselves, and it's really important, I think for us as a regulator to take the time to consider some plausible scenarios about what that might look like."

McGregor said it was important the RBNZ was thinking ahead and seeking to anticipate how things might evolve and how it might respond as a prudential regulator to that changing environment. 

"If we're not thinking about how industry might evolve, how the economy might evolve, then we're not best placed as a regulator to support that innovation and to ensure that we're protecting New Zealand's interests."

The RBNZ will publish its work on the future of banking next month, with similar work to follow on insurance.

"This aims to provide a deeper understanding of the forces shaping banking globally and their potential implications for New Zealand’s banking sector and the regulatory environment – and we are considering a similar piece on the future of insurance," McGregor said.

Prudential levy

Speaking in a question and answer session with NZ Herald senior correspondent Katie Bradford, the Government's proposed prudential levy was brought up.

In May, as part of Budget 2026, the Government announced it was introducing a prudential levy on banks, non-bank deposit takers, insurers and financial market infrastructure providers (FMIs).

At the time Willis said the levy would help cover the cost of services provided by the RBNZ.

The prudential levy consultation paper, issued on Tuesday, estimates the tax would raise $209 million over three years. Deposit takers would pick up the tab for $113 million, or 54% of the total, insurers $81 million, or 39%, and FMIs $15 million, or 7%.

Asked how the levy would deliver on the RBNZ’s financial stability mandate, McGregor said fundamentally, the levy wasn’t going to change how the central bank operated.

“At its heart, this change is about changing the way we're funded,” he said.

McGregor said people often forgot that the RBNZ was a self-funded independent organisation.

"We generate significant revenue at the Reserve Bank through various means, but particularly through issuing money and through managing New Zealand's reserves and those significant portfolios. And in most years that results in a significant dividend that the Reserve Bank pays to the Crown and ultimately to New Zealanders, so that supports important public services out there in New Zealand."

McGregor said the change is about shifting the cost of that regulation from the self-funded RBNZ revenue to those parts of industry that benefit from regulation.

"It's very common in other respects across New Zealand in terms of levy funding," he said, and it was also common in other places like Australia, Canada, Ireland and the United Kingdom," he said.

“Fundamentally it’s just about shifting where the money comes from. The end result, theoretically, being that if industry is funding the prudential regulation parts of the Reserve Bank, that would increase the dividend that goes back to the Crown and ultimately to New Zealanders each year from the Reserve Bank."

McGregor said the RBNZ did not anticipate this would change how the RBNZ regulates.

"Our mandate is our mandate. Our responsibilities, whether they be in legislation, regulation, or otherwise, remain the same.”

He acknowledged that something like the prudential levy may not be welcomed by the industry as it was another cost.

Merging questions from the audience, Bradford put to him that the industry was worried the levy would promote more burden and spend on unnecessary activities. She also asked if in the end, the costs would be passed onto customers.

McGregor said the RBNZ did consider the potential for costs to be passed on as a factor.

The RBNZ would be surprised if that was the case "when you look at it across the piece”, he said. McGregor reiterated that the levy was changing the way they were funded, not the way they worked.

“We are always thinking very carefully about the work we do, how we do it, how we're really laser-focused on our mandate and delivering that, and not creating additional work just for the sake of it ... I would not link the levy to anything additional. Our mandate is our mandate ... This is a funding question.”

‘We don't want to get in the way of innovation’

Asked how you trade off financial stability against the need for growth and disruption within the banking sector, McGregor said they think carefully about competition and innovation.

“We don’t want to get in the way of, for example, new entrants coming into the market, nor do we want to get in the way of innovation.”

McGregor said the RBNZ was “generally agnostic” about how businesses were run - other than in certain areas where they were more prescriptive like when it came to bank capital.

“We are genuinely open for business in terms of new entrants coming into the market. It's interesting the extent to which new entrants sometimes want to be regulated and want to have that badge of regulation or license, but in some cases don't actually meet the requirements of the framework or the base requirements that you need to be, for example, a registered bank," he said.

“We're not preventing anyone from continuing to operate their business in that context ... We genuinely want to see new new entrants and innovation, and I'm always always keen to continue that conversation.”