Reserve Bank says new bank capital requirements will see interest rates paid to depositors 'fall slightly'

Announcing its changes to bank regulatory capital requirements on Wednesday, the Reserve Bank was quick to say they would reduce banks' funding costs, boost their lending capacity, resulting in lower interest rates for borrowers.

So given depositors are among those providing funding to banks, what will the capital changes mean for interest rates paid to savers?

"Within our calculation for the adjustment in banks’ funding costs, we have assumed that the cost of the most interest rate sensitive debt funding, such as term deposits and senior debt issued in wholesale bond markets, falls slightly," a Reserve Bank spokeswoman told interest.co.nz.

"This fall is expected to be significantly smaller than the eight basis points decrease we are expecting for lending interest rates. Our calculation assumes that there is no change in the cost of less interest rate sensitive types of funding, such as transaction accounts."

"There are a number of relevant moving parts in our calculations, and more details will be available when we release the full cost-benefit analysis materials in February," the Reserve Bank spokeswoman said.

A depositor compensation scheme, covering up to $100,000 per person if a deposit taker covered by the scheme fails, was introduced in July this year. It's funded through risk-based levies on eligible deposit takers being banks, building societies, credit unions and finance companies.