Prudential Levy Costs 'Modest' if Passed on to Customers, Treasury Says

The Treasury has estimated that if financial institutions pass on the costs of a new prudential levy to their customers, the impact would be modest.

The levy is expected to raise $209 million over three years, with deposit takers paying the majority at around $113 million, or 54% of the total. Insurers and financial market infrastructure providers will also contribute, with IAG NZ facing an annual levy north of $5 million.

Treasury's estimates suggest that even if institutions pass on the full increase in costs to customers, the impact would be limited. The cost of borrowing is expected to increase by less than one basis point, and insurance premiums by less than 0.2% on average. RBNZ Assistant Governor Angus McGregor said that fundamentally, the levy wasn't going to change how the central bank operated, but rather change the way it's funded.