National Australia Bank has flagged a potential Tier 1 capital increase of about $NZ4 billion to $NZ5 billion ($A3.8b to $A4.7b) for subsidiary Bank of New Zealand, after New Zealand's central bank proposed to almost double capital requirements for banks.
The Reserve Bank of New Zealand (RBNZ) said on Friday it was considering almost doubling the required capital banks would need to hold to bolster the financial system's capacity to handle any shocks.
The RBNZ posited that the New Zealand units of Australia's four major banks would have to add a total of about $NZ12.8 billion in Tier 1 capital to meet its requirements. The central bank proposed a five-year transition period.
Australia and New Zealand Banking Group Ltd flagged a capital increase of $NZ6 billion to $NZ8 billion following the RBNZ's proposal.
Commonwealth Bank of Australia and Westpac Banking Corp have acknowledged the proposal.
"The five-year transitional time frame given to the banks to meet the revised capital framework does appear manageable," Goldman Sachs banking analysts said in a note on Monday.
The Australian Prudential Regulation Authority (APRA) earlier this year also flagged higher capital requirements for the country's major banks to bring them more in line with international standards.
If APRA recognises the extra capital at the New Zealand units of Australian banks, the banks would just need to repatriate the funds and not have to increase their overall capital level, the Goldman Sachs analysts said.
"We note that this final point remains highly uncertain."
An APRA spokesman for was not available for comment.
NAB, Australia's fourth-largest lender, said it and its unit would collectively engage with the RBNZ and the APRA regarding the changes.
Separately, NAB said its chief executive would take about two months leave around the scheduled release of a major report into Australia's finance sector, prompting a rebuke from a shareholder group.
Shares of the lender closed down around half a per cent, in a wider market that ended up 1 per cent. NAB shares have fallen about 20 per cent so far in 2018.
Billions of dollars have been wiped off the value of NAB and its three larger rivals this year as the royal commission exposed a greed-driven culture in which staff were incentivised to mislead customers.
The inquiry is due to release its final report by February 1, 2019.
Analysts expect the report will recommend substantial structural and regulatory changes in the banking, financial advice and fund management sectors.
The lawyers running the inquiry have said they may recommend referring some cases to criminal prosecutors.
