It’s expected to generate about $70 million a year, with the Government saying the revenue will be less than 1% of the big four banks’ total profits.
This was included in forecasts in Budget 2026 but the fine print says the amount to be generated is “subject to the outcome of consultation”.
The Reserve Bank said the announcement was a “decision in principle to the levy’s introduction”. The consultation is on the design of the levy and how to calculate the amount paid by the individual entities.
Given there’s still time before it’s introduced, the consultations and further decisions need to be made, the Herald asked Willis on Tuesday whether there was a possibility she wouldn’t go through with implementing the levy.
“No, it’s simply a requirement of the Reserve Bank Act that in order to do the levy they need to consult,” Willis said.
She said the “Government already agreed to it”.
National’s Nicola Willis says the no new taxes promise doesn’t apply to those already announced. Photo / Anna Heath
After announcing the levy in May, Willis said National may campaign on further tax reform for banks if she couldn’t get coalition agreement.
On Sunday, she said there were no other tax measures “that I can see won’t result in additional costs for Kiwis”.
“So what’s changed is my concern that there isn’t a mechanism that won’t end up being borne by everyday people on their mortgage or their bank fees and I don’t want that.
“I’m really concerned that Kiwis not face the cost of additional taxes and while we looked at alternative mechanisms, none of them stacked up against the simple rule, no more costs for Kiwis.”
But Treasury and the Government’s coalition partner, the Act Party, have said costs of the prudential levy the Government is imposing could be paid by customers.
Willis on Tuesday said the levy was “so, so small in proportion to the profits of banks and in proportion to their revenue” that she didn’t believe the costs would fall on customers.
An Act spokesperson told the Herald it had stopped a wider bank tax and stood by its position that the prudential levy would “add costs to consumers”. It agreed to the levy in Government as a “compromise because National wanted a much bigger tax”.
Act Party leader David Seymour says the cost will be paid by the customer. Photo / Dean Purcell
The prudential levy will apply to banks, non-bank deposit takers, insurers and other financial market participants and is intended to cover the cost of their regulation.
It’s similar to the approach taken by the Financial Markets Authority and Commerce Commission, and consistent with what’s done in other countries.
Analysis conducted by the Treasury said financial institutions “are likely to pass on some portion of the cost to their customers”, but the exact share was uncertain. It said as the size of the levy was “relatively small”, the impact would be “modest” even if fully passed through.
“The Treasury estimates full pass-through of a prudential levy would cause the cost of borrowing to increase by less than 1 basis point, and insurance premiums to increase by less than 0.2%, on average.”
Act leader David Seymour said in May that customers would pay the cost of the levy, with Willis subsequently “directing” banks not to pass the cost on.
“You are the most profitable companies in the country. You do very well for yourselves. Do not put extra costs on to your New Zealand customers,” Willis said.
While the new charge planned for banks is called a levy, political parties, including National, often refer to them and other charges as taxes. For example, while the clean car discount introduced a “fee” on high-emitting vehicles, National called it a “ute tax”.
Jamie Ensor is the NZ Herald’s Chief Political Reporter, based in the press gallery at Parliament. He was previously a TV reporter and digital producer in the Newshub press gallery office. He was a finalist in 2025 for Political Journalist of the Year at the Voyager Media Awards.