The shares of ANZ Group Holdings (ASX:ANZ, NZE:ANZ) and Westpac Banking (ASX:WBC, NZE:WBC) fell over 1% on market close on the New Zealand bourse on Monday, after the Reserve Bank of New Zealand said on Sunday that it invited comments on a review of the prudential capital requirements for banks to determine if they are "set at the right level to support a stable and resilient financial system."

The consultation paper sets out two options for overall capital ratios. The central bank said it moved away from a "1-in-X year event" basis for the risk appetite and instead is focusing on benchmarking against a range of comparable countries.

It proposed simplifying the capital stack by removing additional tier-1 capital and introducing more granular standardized risk weights, including lower risk weights in some areas, reducing the amount of capital that banks are required to hold by around 5% across the system. This might include new risk weight categories for agricultural lending.

The combined proposed changes to the capital ratios and risk weightings together could reduce total required capital by as much as 12% compared to existing rules.

The deadline for submission of the consultations is Oct. 3.

New Zealand's Finance Minister Nicola Willis welcomed the opening of consultation, noting proposals to better align capital requirements with actual risk, and adding that the proposed measures would help "even the playing field between larger banks and their smaller competitors."