The Australian Prudential Regulation Authority (APRA) started consulting on establishing a third tier in its banking prudential framework to enhance proportionality and competition, following the Council of Financial Regulators' review into small and medium-sized banks, the financial watchdog said in a statement on Friday.

Banks are currently classified as either significant or non-significant financial institutions, with significant financial institutions (SFIs) facing additional or heightened requirements in some areas relative to non-SFIs.

APRA plans to establish a new tier of Most Significant Financial Institutions for banks exceeding AU$300 billion in assets. The second tier will classify all other banks as SFIs, with the threshold increased from AU$20 billion to AU$30 billion, while the third tier will consist of non-SFIs, covering all remaining banks.

Following the statement's release, ANZ Group (ASX:ANZ, NZE:ANZ) shares rose nearly 1% in recent New Zealand trade, and Westpac (ASX:WBC, NZE:WBC) shares were up almost 1% in Australian and New Zealand trade.

Additionally, National Australia Bank (ASX:NAB) and Commonwealth Bank (ASX:CBA) shares both rose in midday trade on Friday.