Oliver Wyman RBNZ Capital Review - Comparing New Zealand Bank Capital Ratios to International Peers

COMPARING NEW ZEALAND BANK CAPITAL RATIOS TO INTERNATIONAL PEERS 30 July 2025

Qualifications/assumptions and limiting conditions Oliver Wyman was commissioned by the Reserve Bank of New Zealand to produce an independent, factual benchmarking of New Zealand banks’ regulatory capital ratios against the capital ratios of a group of peer countries. Oliver Wyman shall not have any liability to any third party in respect of this report or any actions taken or decisions made as a consequence of the results, advice or recommendations set forth herein. The opinions expressed herein are valid only for the purpose stated herein and as of the date hereof. Information furnished by others, upon which all or portions of this report are based, is believed to be reliable but has not been verified. No warranty is given as to the accuracy of such information. Public information and industry and statistical data are from sources Oliver Wyman deems to be reliable; however, Oliver Wyman makes no representation as to the accuracy or completeness of such information and has accepted the information without further verification. No responsibility is taken for changes in market conditions or laws or regulations and no obligation is assumed to revise this report to reflect changes, events or conditions, which occur subsequent to the date hereof.

CONTENTS Executive Summary 4 1 Context, methodology and limitations 11 1.1 Overview of relevant terms and key areas of national discretion 11 1.2 Detailed methodology and relevant limitations 14 1.3 “Basel 3.1” reforms and international standards 16 1.4 Prior relevant studies 18 2 Adjusting New Zealand capital ratios to make an international comparison 21 2.1 Context: regulatory minimum capital requirements 21 2.2 Adjusting reported bank capital ratios 23 2.3 Adjustments for New Zealand banks under the standardised approach 25 2.4 Forecast 2028 internationally comparable capital ratios 26 3 Comparison between New Zealand and peer countries 28 3.1 Selection of peer set 28 3.2 Identified variations in capital definition and RWA calculation 29 3.3 International comparison of capital ratios 31 3.4 Comparison of total loss-absorbing capacity requirements 33 3.5 Companion analysis: capital coverage ratios 35 4 Comparison against large-scale country set 37 4.1 Comparison against Basel III monitoring report dataset 37 4.2 Comparison against S&P Global Ratings risk-adjusted capital ratios 39 Overall conclusions 40 Appendix A 41 Appendix B 47

© Oliver Wyman 4 Comparing New Zealand Bank Capital Ratios To International Peers CONTEXT In 2025, the Reserve Bank of New Zealand (RBNZ) is undertaking a review of key capital settings. This review will assess whether the Reserve Bank’s capital requirements for deposit takers are set at the appropriate level to support a stable financial system. This report, commissioned by the RBNZ as part of its review, provides an independent benchmarking of New Zealand banks’ capital ratios against those of peer countries. The analysis focuses exclusively on the international comparability of New Zealand banks’ capital ratios. Broader questions regarding the rationale for regulatory differences or the appropriateness of current settings for New Zealand are addressed separately within RBNZ’s wider review. Banks (and other financial institutions) hold capital for a range of reasons, including for absorbing losses from their business activities. Prudential regulators also have an interest in banks’ ability to absorb losses because of their mandates for financial system stability. As such, prudential regulators typically have minimum requirements for the amount and type of capital that banks must hold. Minimum capital must be sufficient to absorb losses, but this is a balancing act: requirements to hold too much capital can impede a bank’s ability to provide loans, contribute to economic growth and produce competitive returns. Most developed countries use a regulatory bank capital framework developed by the Basel Committee on Banking Supervision (BCBS), with the latest version of that framework being called ‘Basel III’. Jurisdictions sometimes make variations to the Basel III framework upon national implementation to reflect features or concerns related to their own financial system. These may include differences in the definition of capital, risk calculation methodologies, additional capital buffers, and the use of internal bank models. In order to compare bank capital ratios across countries, these variations, as much as possible, should be identified and adjusted for, so that capital ratios can be compared under a common standard. This report performs such adjustments, to compare New Zealand bank capital ratios on an internationally comparable basis to global peers. EXECUTIVE SUMMARY

© Oliver Wyman 5 Comparing New Zealand Bank Capital Ratios To International Peers APPROACH AND KEY LIMITATIONS OF THIS REPORT This report compares the actual capital ratios of peer banks vs New Zealand banks. The capital ratio of a bank is driven by multiple factors including market-wide “Pillar 1” minimum capital requirements, bank-specific public “Pillar 2” minimum capital requirements, non-public Pillar 2 regulatory guidance, and banks adding an additional buffer beyond regulatory requirements. This report has not analysed the drivers behind why any particular bank maintains the actual capital ratios that it does. Comparing regulatory capital ratios across countries is inherently complex and subject to several limitations seen in both this and other similar reports.1 This report is not seeking to comprehensively identify all areas where countries differ in capital rules, and it is not seeking to calculate mathematically exact capital ratios in the case that banks were subject to an alternative capital regime. Rather, this report is seeking to, as best as possible within the confines of a short outside-in review, provide a balanced comparison between New Zealand bank capital ratios and international bank capital ratios. Key methodological limitations are: • Data availability: To adjust New Zealand’s capital requirements for international comparability, we rely on publicly available information (primarily banks’ Pillar 3 disclosures) and data provided by the RBNZ. Due to limited data availability, certain assumptions were necessary. Similar assumptions were required when adjusting capital ratio data across other jurisdictions. • Identifying and adjusting for variations in capital rules versus international Basel III standards: Not all differences in capital rules, especially those related to internal bank model approvals, are publicly transparent. Where such details are unavailable, adjustments could not be quantified. Our analysis focuses on the most material and identifiable variations, with qualitative discussion of others. • “Basel 3.1” reforms in-flight implementation: The BCBS has agreed a set of “Basel 3.1” reforms that are reflected in published international guidelines.2 However, for many countries, implementation of these reforms is in-flight as of July 2025. In this report, we have primarily used data from calendar year 2024; in order to compare capital ratios to a common standard, we have used capital rules pre-Basel 3.1 reforms as the common standard. See section 1.3 for further discussion on this point. This report should therefore be considered a point-in-time comparison, in the context that capital rules are evolving in many countries. As a result of the above, this report produces results that necessarily contain approximations. We believe that they provide reasonable conclusions about the relative ranking of international capital ratios. Without direct access to bank data and extensive modelling beyond the scope of this report, the exact values of estimates will not be completely accurate. 1 Particularly relevant similar reports are the 2017 and 2019 New Zealand capital comparison studies commissioned by the New Zealand Bankers’ Association. These are discussed further in section 1.4. 2 Basel III: Finalising post-crisis reforms, https://www.bis.org/bcbs/publ/d424.htm.

© Oliver Wyman 6 Comparing New Zealand Bank Capital Ratios To International Peers APPROACH The comparison of regulatory capital requirements proceeds in three steps:

1. Current New Zealand bank capital ratios are restated to be as internationally comparable as possible.
2. Capital ratios for banks in ten peer countries are also restated to be internationally comparable, to the extent possible given data availability. Capital ratios for these countries are then compared with New Zealand capital ratios.
3. As an additional check, capital ratios for two large samples of ~200 banks across a broader set of countries are compared to New Zealand banks. Throughout this report, key capital ratios (“Common Equity Tier 1 (CET1) Capital”, “Tier 1 Capital” and “Total Capital”) are all considered. For simplicity, often only CET1 figures are mentioned when results for Tier 1 and Total Capital are similar. See section 1.1 for an overview of these terms. INTERNATIONAL COMPARABILITY OF NEW ZEALAND CAPITAL RATIOS (SEE SECTION 2) In comparing RBNZ capital requirements to international Basel III standards, we have identified five key areas of variation — see Exhibit 1 below. The existence of variations does not imply any judgement on New Zealand’s capital rules, or that New Zealand lags behind international standards; it is simply the case that variations should be adjusted for in order to compare capital ratios across countries. In aggregate, we have found that New Zealand banks’ capital ratios would be higher if they were applied under an international standard Basel III framework. We have estimated the magnitude of this increase to be ~780bps for the CET1 capital ratio.

© Oliver Wyman 7 Comparing New Zealand Bank Capital Ratios To International Peers Exhibit 1: Summary of variations to New Zealand capital rules, and estimated impact to adjusted CET1 ratio Adjustments Impact to CET1 ratio3 Adjustments to Capital Definition New Zealand bank capital rules specify a narrower definition of what counts as capital to absorb losses, with fewer types of non-common equity capital being eligible.4 A narrower definition of capital means that banks need to hold more capital for the same amount of risk.5 ~60bps Adjustments to Credit Risk Calculation Rules New Zealand’s public capital rules are generally more conservative regarding the calculation of risk-weighted assets (RWAs); that is, the risk that capital is held against. The most material asset classes with variations in rules are secured residential lending, farm lending, and specialised lending. ~330bps Adjustments for Credit Risk IRB Model Conservatism In certain instances, we identified areas where RBNZ uses regulatory discretion (as opposed to public rules) to require that the output and calibration of New Zealand bank internal ratings-based (IRB) estimates are more conservative (for example, in calculating how much a bank would lose if a client were to default).6 ~60bps Adjustment for RWA Scalar and Output Floor New Zealand rules require that internally modelled credit RWAs (under the “IRB” approach) must be scaled up by a factor of 1.2. New Zealand rules also stipulate an “output floor” that internally modelled RWAs cannot fall below 85% of equivalent RWAs calculated under a “standardised” approach, while most international peers have not fully implemented equivalent output floors.7 ~270 bps Adjustment for Market Risk New Zealand banks are required to have interest rate risk in the banking book (IRRBB) reflected in total market risk RWAs, where many international peers are not under similar requirements. ~60bps Total estimated impact to CET1 capital ratio ~780bps Source: RBNZ, Public NZ Bank Data, Oliver Wyman analysis 3 The total adjustment is 780bps, however there is complexity in allocating impacts per-adjustment, because some adjustments overlap (e.g. the IRB RWA 1.2 scalar and other adjustments that affect IRB RWAs). See appendix A.2 for a discussion of how the total adjustment was allocated per-adjustment. 4 For example, New Zealand rules require ‘deferred tax assets’ to be fully deducted from CET1 capital, whereas under Basel rules these assets can be partially included. 5 There is some circularity in determining the impact of a narrower definition of capital. Banks consider regulatory treatment when deciding which funding instruments to issue, and so they may not issue instruments if they are not counted as capital. As such, observing the current instruments issued to determine the result of a narrower definition of capital may understate the impact. 6 It is not possible to determine to what extent this is due to features of the New Zealand financial system, New Zealand banks’ own risk appetite, RBNZ model accreditation conservatism, or the accreditation approaches of the home supervisor for New Zealand’s large Australian-owned banks (the Australian Prudential Regulation Authority). 7 An output floor of 72.5% is outlined in Basel 3.1 reforms, and most international regulators have implemented output floors at this level. However, in most jurisdictions, these floors are being gradually phased in (i.e. starting at 50% and increasing year-on-year). Since this report is comparing actual held capital, we consider it appropriate to adjust New Zealand’s bank capital ratios as though there were no floor requirement. See section 2.2 for further discussion.

© Oliver Wyman 8 Comparing New Zealand Bank Capital Ratios To International Peers COMPARISON BETWEEN NEW ZEALAND AND PEER COUNTRIES (SEE SECTION 3) To compare New Zealand capital ratios to international peers, we selected a peer group of 10 countries similar to New Zealand (in country size and financial and economic context). This peer group consists of Australia, Canada, Hong Kong, Singapore, Israel, the United Kingdom, Belgium, Sweden, Ireland, and Norway. In order to compare capital ratios for each of these peer countries, we identified and adjusted for the most material national variations in capital rules vs a framework fully aligned to Basel III standards. In terms of the variations identified amongst this peer set • Australia also has a narrower definition of capital and a more conservative approach to calculate risk-weighted assets vs a fully-aligned Basel III framework. The Australian Prudential Regulatory Authority (APRA) has acknowledged this in published reports, 8 and the major Australia banks annually publish “internationally comparable” capital ratios in their investor presentations. As of FY24 reporting, these internationally comparable ratios are (on average) ~600bps higher than reported ratios (for CET1). • Some variations versus international standards are seen for other countries, but the total number and impact is smaller. The largest adjustment identified among countries other than Australia and New Zealand is Hong Kong, which saw an average increase of 220bps (CET1) after adjusting for a narrower definition of CET1 capital. When comparing adjusted capital ratios, New Zealand CET1 capital ratios are higher than capital ratios of nine of the countries in the peer sample, and slightly lower than the capital ratios for Norway. See section 3.3. For some other metrics, New Zealand bank capital ratios are lower than some other countries. Specifically: • When comparing Total Capital (which includes “gone concern” capital designed to be used when a bank is failing), although New Zealand has relatively high Total Capital, many other countries (including all European countries in the sample) hold additional “Total Loss Absorbing Capacity” (TLAC) capital at levels higher than New Zealand. This is discussed further in section 3.4. • Although Israel and Ireland capital ratios are lower than New Zealand capital ratios (after adjusting all ratios to be internationally comparable), Ireland and Israel banks hold more capital per dollar of lending in key loan books. See section 3.5 for further detail. Key drivers of this are frequent use of the standardised approach for credit risk RWAs in Israel and Ireland (New Zealand’s four major banks use the IRB approach), and high IRB risk weights in Ireland reflecting data covering severe downturns in their modelling datasets. 8 https://www.apra.gov.au/sites/default/files/improving_the_transparency_comparability_and_flexibility_of_the_adi_ capital_framework_0.pdf.

© Oliver Wyman 9 Comparing New Zealand Bank Capital Ratios To International Peers Overall, the peer country analysis suggests that, after making reasonable adjustments to compare capital ratios across countries, New Zealand core capital ratios are higher than the majority of chosen peer countries, but also that some peer banks hold more capital according to some metrics. COMPARISON ACROSS A LARGER SAMPLE OF BANK CAPITAL RATIOS (SEE SECTION 4) Additional analyses were performed on two larger-scale datasets and indicate that New Zealand banks’ (adjusted) capital ratios are above the median capital ratios, but lower than many banks in the sample • Basel III Monitoring Report Dataset (see section 4.1): New Zealand banks’ capital ratios (after being adjusted to be internationally comparable) were compared to (unadjusted) March 2025 Basel III Monitoring report data9, which covers capital ratios for 176 banks. Based on this data, New Zealand banks rank above the 75th percentile for the 111 “Group 1” banks, and between the 50th and 75th percentile for the 65 “Group 2” banks.10 • S&P Global Ratings “Risk-Adjusted Capital” (RAC) Ratios (see section 4.2): S&P Global Ratings produce RAC ratios, which compare the level of capital held by banks using an internationally consistent, proprietary methodology.11 When comparing New Zealand’s RAC ratios to ratios for S&P Global Ratings's Top 200 Global Banks, New Zealand banks are above the 75th percentile. A caveat to these large-scale comparisons is that they include both much larger “Global Systemically Important Banks” (G-SIBs) and much smaller banks, which may both not be directly comparable to New Zealand banks. 9 https://www.bis.org/bcbs/publ/d592.htm. 10 “Group 1” banks are defined as ‘internationally active banks with Tier 1 capital of more than €3 billion,’ and Group 2 banks are all other banks. Major New Zealand banks have Tier 1 capital of more than €6 billion, and so fall in the lower end of Group 1 banks. Both Groups are arguably comparable to New Zealand banks. 11 Data and methodology are not publicly available, but see e.g. https://www.spglobal.com/ratings/en/regulatory/ article/-/view/sourceId/13062752

© Oliver Wyman 10 Comparing New Zealand Bank Capital Ratios To International Peers OVERALL CONCLUSIONS There are limitations and inherent complexities in any international comparison of capital ratios. With these complexities in mind, the analyses considered in this report suggest that: • New Zealand banks’ capital rules have multiple areas of conservatism versus Basel III international standards. • New Zealand CET1 ratios, if adjusted to be comparable to international peers, would increase by an estimated ~780bps. • After adjusting New Zealand’s capital ratios to be internationally comparable, New Zealand bank capital ratios are higher than the majority of global peers (particularly for CET1 capital). • However, New Zealand’s held capital is lower than some peer banks as per some other metrics (see e.g. TLAC in section 3.4 and capital coverage ratios in section 3.5). These results are directionally aligned with previous studies (e.g. the 2017 and 2019 reports commissioned by the New Zealand Bankers’ Association). This report’s conclusions are an input to RBNZ’s broader review of capital settings, which will consider to what extent this variation is commensurate with the local characteristics of New Zealand’s financial system and risk profile.

© Oliver Wyman 11 Comparing New Zealand Bank Capital Ratios To International Peers 1.1 OVERVIEW OF RELEVANT TERMS AND KEY AREAS OF NATIONAL DISCRETION The amount of capital that banks are required to hold by regulators is typically expressed as a capital ratio that links the risks from a bank’s business (“risk-weighted assets”) to the loss absorption capacity a bank has on its balance sheet (capital). Under Basel accords as well as common practice across relevant countries, capital ratios for a bank are defined as: Capital Ratio (%) = Capital Risk-Weighted Assets OVERVIEW OF “RISK-WEIGHTED ASSETS” “Risk-Weighted Assets” (RWA) is a quantitative measure of the risk associated with a bank’s assets. This is considered over three categories in the standard Basel III framework12: credit risk, market risk and operational risk. Banks calculate the value of their RWAs based on methodology specified by their relevant regulator. Banks can calculate this using “standardised” methods (simpler methods that rely on easily produced data) or internal modelling-based methods such as “Internal Ratings-Based” (IRB) methods. Regulators review, challenge and approve banks’ IRB and similar models. This report has considered variations in both standardised and IRB approaches 12 Basel RBC20 paragraph 20.4, https://www.bis.org/basel_framework/chapter/RBC/20. CONTEXT, METHODOLOGY AND LIMITATIONS SECTION 1

© Oliver Wyman 12 Comparing New Zealand Bank Capital Ratios To International Peers OVERVIEW OF “CAPITAL” This report considers capital across four categories: Exhibit 2: Key types of capital considered under capital requirements Type of capital Purpose Core components (as per Basel III) Common Equity Tier 1 (CET1) Highest quality capital; absorbs losses immediately when they occur. Common shares, retained earnings, other comprehensive income, minus regulatory deductions. Tier 1 Capital Ensures ongoing concern capital to absorb losses without triggering bankruptcy. All CET1 capital, plus “Additional Tier 1” instruments (e.g., perpetual bonds with loss absorption features). Total Capital Provides additional “gone concern” protection when a bank is failing, to absorb losses before depositors and other senior creditors. All Tier 1 Capital plus Tier 2 instruments (e.g. subordinated debt, hybrid instruments, loan-loss reserves). Total Loss-Absorbing Capacity (TLAC) Helps reduce risk of contagion if a systemically important bank must be resolved. TLAC instruments (includes all CET1 capital, AT1 and Tier 2 capital that meet certain conditions, and other eligible debt instruments) Source: Basel Committee on Banking Supervision13 The RBNZ imposes capital requirements for banks across CET1, Tier 1 and Total capital14, and so the majority of this report compares capital ratios for these three types of capital. There are currently no RBNZ requirements for TLAC capital; TLAC is considered for relevant peer countries in section 3.4. Many jurisdictions also impose a “minimum leverage ratio”, which uses Tier 1 capital as the numerator, but total assets (as opposed to risk-weighted assets) as the denominator. This metric has not been analysed in this report because the RBNZ does not impose leverage requirements on New Zealand banks. When other international banks are subject to a minimum leverage ratio, this may be one factor that drives their overall level of held capital. HOW CAPITAL RULES CAN VARY ACROSS COUNTRIES Jurisdictions have national discretion when implementing a local version of the Basel III capital framework. Each area of national discretion (see Exhibit 3 below) can increase or (more rarely) decrease the level of capital that a bank is required to hold. Regulators can choose to apply one or multiple of these areas of discretion. 13 See for example the BCBS definition of CET1, Tier 1 and Total Capital here: https://www.bis.org/fsi/fsisummaries/ defcap_b3.htm and BCBS discussion of TLAC here: https://www.bis.org/bcbs/publ/d387.pdf. 14 https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/regulation-and-supervision/banks/banking-supervision￾handbook/bpr100-capital-adequacy-1-july-2024pdf.

© Oliver Wyman 13 Comparing New Zealand Bank Capital Ratios To International Peers Exhibit 3: Key areas of national discretion in capital requirements Area of discretion Example impact on reported capital ratios

1. Narrower or broader definitions of what counts as capital to absorb losses. If a bank has a narrower definition of “capital”, it will appear to have a lower capital ratio than a similarly capitalised peer.
2. Variations in rules for how risk￾weighted assets are calculated (e.g. different standardised risk weights. If a bank calculates risk-weighted assets using more conservative rules, it will appear to have more risk￾weighted assets (and therefore a lower capital ratio) than a similarly capitalised peer.
3. Different outcomes from the internal models that banks can use to calculate their risk-weighted assets. If a bank calculates risk-weighted assets using more conservative internal models, it will appear to have more risk-weighted assets (and therefore a lower capital ratio) than a similarly capitalised peer.
4. Different minimum capital requirements (e.g. additional Pillar 2 capital requirements and supervisory buffers). A bank with higher minimum capital requirements may hold more capital than a peer with lower minimum capital requirements. This is directly visible in reported capital ratios. Source: Oliver Wyman analysis of capital rules across countries OVERVIEW OF BASEL III “PILLARS” The Basel III framework is anchored on three pillars: Pillar 1 sets out core minimum capital requirements, Pillar 2 allows for additional local supervisor discretion, and Pillar 3 sets out mandatory disclosure requirements. Exhibit 4 below contains further detail: Exhibit 4: Overview of Basel III Pillars Pillar Implications for this report Pillar 1 Minimum capital requirements for credit risk, market risk and operational risk. Minimum capital requirements regularly refer to “Pillar 1” requirements. Pillar 2 Oversight and challenge by local regulators of bank risk management and capital adequacy. Minimum capital requirements sometimes refer to additional ‘Pillar 2’ requirements imposed by local regulators. Most variations in implementation across countries vs a fully-aligned Basel IIII framework occur under this Pillar. Pillar 3 Requirements for banks to publish information on risk management and capital adequacy. This report makes frequent reference to ‘Pillar 3’ reports, that contain publicly available bank data on a range of capital metrics. Source: Basel Committee on Banking Supervision15 15 Source: BCBS e.g. https://www.bis.org/bcbs/publ/d318.pdf page 4 “Scope”.

© Oliver Wyman 14 Comparing New Zealand Bank Capital Ratios To International Peers 1.2 DETAILED METHODOLOGY AND RELEVANT LIMITATIONS This report focuses on the question of how capital settings compare internationally: it is not considering why capital settings differ between jurisdictions, or how they should differ given any specific risks New Zealand faces. These latter questions will be considered as part of RBNZ’s broader capital review. The three key steps in the methodology were: A) Choosing banks and gathering bank data B) Identifying variations versus the international Basel III standard C) Modelling variations A) CHOOSING BANKS AND GATHERING BANK DATA This report compares the actual capital ratios of peer banks vs New Zealand banks. This is primarily because, in order to adjust capital ratios to be internationally comparable, actual financial data for particular banks is required (e.g. the relative proportion of retail versus non-retail loans in a banking book). The capital ratio of a bank is driven by multiple factors including market-wide “Pillar 1” minimum capital requirements, bank-specific public “Pillar 2” minimum capital requirements, non-public Pillar 2 regulatory guidance, and banks adding an additional buffer beyond regulatory requirements. This report has not analysed the drivers behind why any particular bank maintains the actual capital ratios that it does. For New Zealand, this report analysed data from the five largest New Zealand banks: ASB, BNZ, WNZL, ANZ and KiwiBank. Public financial data are taken from the most recent full-year annual report or Pillar 3 report. Additional non-public data was provided by the RBNZ; the March 2025 RBNZ “Capital Satellite Survey” data provides more granular data on credit risk RWA by asset class, risk weight, PD band and LGD band. The RBNZ also provided supplementary sources to inform key assumptions required to model adjustments. For peer countries, data was analysed for major banks, where “major” was defined as holding at least a 10% market share by assets. No non-public data was sourced for any peer country analysis. In most cases, public financial data are taken from the most recent full-year annual report or Pillar 3 report (see Appendix B for detailed information on data sources considered). This report calculates country capital ratios for each in-scope country. In all cases, country capital ratios are calculated as the weighted average of per-bank capital ratios, weighted by total RWA for the chosen banks.

© Oliver Wyman 15 Comparing New Zealand Bank Capital Ratios To International Peers Key limitations with this approach are as follows: • A full mathematical harmonisation of capital definition and RWA calculation across banks and jurisdictions requires very granular data held only by the banks themselves. Adjustments (to both New Zealand capital ratios and comparable peer countries) are approximate, focus on the most material areas of variation, and rely on assumptions (key assumptions are called out in Appendices A and B). • Differences in accounting standards across jurisdictions also adds the possibility that key line items are not 100% comparable (for example, different accounting standards have different definitions of “deferred tax assets”, which is one component of CET1 capital). This report has not attempted to adjust for differences in accounting standards. • Wherever possible, bank data has been sourced as of the most recent reporting period. There are some residual differences in reporting times (e.g. June versus December 2024). Figures cited in this report (e.g. assets, exposures) do not change as rapidly as some others (e.g. profit), but this nonetheless adds an additional limitation on the comparability of bank capital ratios in this report. B) IDENTIFYING VARIATIONS VERSUS INTERNATIONAL BASEL III STANDARDS This report focuses on key regulatory-driven differences that affect capital ratios in New Zealand and ten selected peer countries. The report does not aim to comprehensively review all details of capital regimes, either in New Zealand or comparable jurisdictions. To identify variations in New Zealand’s capital rules, we have: • Collated an initial list of variations based on the New Zealand Bankers Association’s prior 2017 and 2019 studies on New Zealand capital variations as well as the RBNZ’s subsequent 2019 Capital Review decisions paper. • Supplemented this list with independent research. • Held one information session with New Zealand bank and non-bank deposit-taker representatives in June 2025 to provide them with the opportunity to raise any other material variations they were aware of. • Validated the final list of variations with the RBNZ. Variations in peer jurisdiction application of the Basel III framework were identified using a similar approach. We have: • Collated an initial list of variations per country based on public documents (including Basel Committee “Regulatory Consistency Assessment Programme” (‘RCAP’) assessments), national regulatory capital requirements, and public comparison reports. • Supplemented this list with independent research. • Tested draft lists of variations with Oliver Wyman global experts for relevant countries.

© Oliver Wyman 16 Comparing New Zealand Bank Capital Ratios To International Peers Variations have been identified and quantified if they are “in force” as of most recent available data (e.g. from Pillar 3 reports). Future regulatory changes (in particular, phasing in of the Basel 3.1 reforms) have been noted where relevant but not quantified (see section 1.3 for further discussion on this). C) MODELLING VARIATIONS For each variation (for both New Zealand and peer countries), financial data was used to calculate an alternative capital ratio as if that variation were absent. In many cases, assumptions were required and these have been detailed in Appendices A and B. Two relevant limitations when modelling variations are: • Visibility of IRB model variations: National regulators have discretion when reviewing, challenging and approving banks’ IRB models to calculate risk-weighted assets. This discretion can materially affect the overall RWA calculation, but is often not public and therefore cannot be fully listed or quantified. It is possible that a country uses this discretion to require conservative IRB models (as opposed to imposing conservatism through public rules), and this would not always be picked up under our methodology. • Considerations for underlying economic or system risk: It can be argued that, in order to adjust for international comparison, one should attempt to distinguish between variations based on regulatory conservatism, vs variations that account for systemic risks (due to the financial system or macro-economic context).16 Making such distinctions requires extensive qualitative analysis and judgement; we therefore have not made such distinctions in this report 1.3 “BASEL 3.1” REFORMS AND INTERNATIONAL STANDARDS This report aims to compare capital ratios across countries by, as much as possible, restating capital ratios as though they were applied under a common standard. There is, however, complexity regarding what this “common standard” should be, particularly regarding the in-flight implementation of “Basel 3.1” reforms. 16 For example, the Central Bank of Ireland noted in 2022 that Irish mortgage risk weights are high, but this was driven by local risk profile factors such as severe losses during the 2008 Financial Crisis. See https://www.centralbank.ie/ docs/default-source/publications/financial-stability-notes/risk-weights-on-irish-mortgages.pdf.

© Oliver Wyman 17 Comparing New Zealand Bank Capital Ratios To International Peers The “Basel 3.1” reforms refer to the final Basel III reform package approved in December 2017 by the Group of Central Bank Governors and Heads of Supervision. Key relevant aspects of the Basel 3.1 reforms17 are: • Updated standardised approaches for credit risk, credit valuation adjustment and operational risk (for example, more granular residential mortgage risk weights that vary by Loan-to-Value ratio). • Updated limits on certain inputs used to calculate credit risk-weighted assets under the internally-modelled approach (e.g. minimum values for Loss Given Default). • New output floors for final values for internally modelled RWA calculations (relative to standardised risk-weighted asset calculations); corresponding removal of the 1.06 scalar factor for internally-modelled RWAs. Implementation timeframes are in-flight as of mid-2025, as per Exhibit 5 below. Exhibit 5: Implementation of Basel 3.1 reforms for New Zealand and peer countries Country Implementation status New Zealand • The RBNZ’s 2019 Capital Review includes aspects of the Basel 3.1 reforms (e.g. an 85% output floor on internally-modelled RWAs) but is not a full implementation. Australia • Local version implemented from January 2023. • Output floor of 72.5% in place for internally modelled RWAs. Hong Kong • Local version implemented from January 2025. • Output floor gradually being phased in, taking 72.5% value in 2030. Singapore • Local version implemented from July 2024. • Output floor gradually being phased in, taking 72.5% value in 2029. Canada • Local version implemented from April 2023. • Output floor gradually being phased in, taking 72.5% value in 2027. Israel • Not yet implemented. European countries (Belgium, Ireland, Norway, Sweden) • Local version implemented from January 2025. • Output floor gradually being phased in, taking 72.5% value in 2030. United Kingdom • Not yet implemented; implementation currently scheduled for 1 January 2027. Output floor to be phased in after implementation begins. Source: Basel Committee on Banking Supervision, Public national regulator disclosures18 17 https://www.bis.org/bcbs/publ/d424_hlsummary.pdf. 18 BCBS RCAP ‘Adoption of key Basel III standards as of 15/05/2025’, https://www.bis.org/bcbs/implementation/rcap_reports.htm.

© Oliver Wyman 18 Comparing New Zealand Bank Capital Ratios To International Peers It is a judgement decision on whether the “common standard” used for international comparison should be inclusive of Basel 3.1 reforms, or not. We have chosen the Basel III rules before the Basel 3.1 reforms as the common standard, because: • Many countries (e.g. in Europe) have only implemented the Basel 3.1 reforms as of 2025, and the most recently available public Pillar 3 data (as of July 2025 when this report was prepared) is from December 2024. • For many countries who have implemented these reforms, key aspects (e.g. the RWA output floor) are still being phased in as of July 2025. It is important to note that both banks’ actual capital ratios and banks’ underlying regulatory requirements are expected to evolve as Basel 3.1 is implemented over the coming five years. Given the focused nature of this report, we have not forecast impacts of Basel 3.1 reforms further. 1.4 PRIOR RELEVANT STUDIES Several prior studies have compared capital rules across jurisdictions and quantified internationally comparable capital ratios for Australian and New Zealand banks. This report considered the methodology, identified variations and results of these prior studies. Comparing results of this 2025 study vs these prior studies should be done carefully, noting that capital rules themselves have changed vs the capital rules considered under prior studies, and capital ratios for most countries have gradually increased over the past 5-10 years (when capital ratios rise, even holding the rules the same, the size of the adjustments (measured in basis points) will also rise). PRIOR NEW ZEALAND STUDIES AND COMPARISON TO THIS OLIVER WYMAN REPORT The New Zealand Bankers’ Association (NZBA) has commissioned studies investigating the international comparability of New Zealand banks’ capital ratios: • The NZBA published the report International comparability of the capital ratios of New Zealand’s major banks19, authored by PwC, in October 2017. This report found that internationally comparable New Zealand CET1 ratios increased by ~600bps compared to reported CET1 ratios, with the key driver being more conservative rules for calculating credit risk-weighted assets (particularly for residential mortgages and farm lending). The report also found that New Zealand banks, after adjusting for international comparability, had higher capital ratios than most (but not all) comparable peer countries. 19 https://www.nzba.org.nz/wp-content/uploads/2017/11/PWC-capital-ratios-study.pdf.

© Oliver Wyman 19 Comparing New Zealand Bank Capital Ratios To International Peers • The NZBA released an updated report in 201920, which presented a revised estimate of ~520bps increase when New Zealand CET1 ratios were adjusted to be internationally comparable. The updated report also acknowledged feedback provided by the RBNZ.21 This Oliver Wyman report broadly takes the same approach as the reports prepared for the NZBA. There are two important methodological differences: • Oliver Wyman’s independent report has been produced for the RBNZ; accordingly, we have calculated New Zealand adjustments based on public Pillar 3 data and non-public bank data already possessed by RBNZ. In contrast, the NZBA reports used private data and additional modelling provided directly by some New Zealand banks. • The NZBA reports also considered how New Zealand banks’ capital ratios would change if these banks were subject to a range of foreign capital regimes. We have not performed a similar analysis; in our judgement, it is sufficient to compare capital ratios when all rules have been adjusted to a common Basel III standard. PRIOR AUSTRALIAN STUDIES In Australia, several studies have calculated internationally comparable capital ratios for Australian banks: • Australia’s 2014 Financial System Inquiry (FSI)22 noted the difficulty in comparing capital ratios across countries “given the varied national discretions taken by different countries, including Australia.” Two submissions to the FSI calculated internationally comparable Australian CET1 ratios: – A submission by the Australian Banker’s Association (ABA)23, produced by PwC, identified a list of variations in Australia capital rules vs Basel standards and international peers. After adjusting Australian capital ratios to be comparable to international peers, the submission found that Australian CET1 ratios increased by ~390 bps. Key drivers were a narrower definition of capital and more conservative rules for credit risk RWA calculation (e.g. for residential mortgages and specialised lending). – A second submission by APRA24 identified a different list of variations, and concluded that, after adjusting for these variations Australian CET1 ratios increased by ~190 bps. The key difference between the ABA report and APRA report was that the ABA report considered additional variations (e.g. conservatism in IRB models) and found a higher impact due to the variation for residential mortgages. 20 https://www.nzba.org.nz/wp-content/uploads/2019/05/Appendix-Two-International-comparability-of-capital￾ratios-2019.pdf. 21 https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/regulation-and-supervision/banks/capital-review/capital￾review-2017-pwc-nz-study.pdf. 22 https://treasury.gov.au/sites/default/files/2019-03/p2014-FSI-01Final-Report.pdf, page 48. 23 https://www.ausbanking.org.au/wp-content/uploads/2012/12/20140413-ABA-Submission-PWC-International￾comparability-of-capital-ratios.pdf. 24 https://www.apra.gov.au/sites/default/files/APRA-2014-FSI-Submission-FINAL_0.pdf, page 81.

© Oliver Wyman 20 Comparing New Zealand Bank Capital Ratios To International Peers • In 2015, APRA published an International Capital Comparison Study25 responding to the FSI final report. APRA’s study listed a specific set of variations and quantified the overall impact as an increase of ~300bps to average CET1 ratios for Australian banks. APRA later published a 2018 paper Improving the transparency, comparability and flexibility of the ADI capital framework26, which included an estimate of a ~485bps increase to the CET1 ratio. • The four major Australian banks publish internationally comparable capital ratios in their annual investor presentations (see appendix B.1 for further detail). • APRA introduced a new regulatory capital framework from 1 January 2023, aligned to the Basel 3.1 final reforms. In March 2023, the ABA released a Basel 3.1 Capital Comparison Study27 which detailed (but did not quantify) differences between APRA’s framework and Basel 3.1 requirements. The Australian banks subsequently publish internationally comparable ratios aligned to the variations identified in the ABA report in their investor presentations. 25 https://www.apra.gov.au/sites/default/files/150710-international-capital-comparison-information-paper_0.pdf. 26 https://www.apra.gov.au/sites/default/files/improving_the_transparency_comparability_and_flexibility_of_the_adi_ capital_framework_0.pdf, page 12. 27 https://www.ausbanking.org.au/wp-content/uploads/2023/03/PwC-Basel-3.1-Capital-Comparison-Study-10- March-2023.pdf.

© Oliver Wyman 21 Comparing New Zealand Bank Capital Ratios To International Peers In this section, reported New Zealand bank capital ratios are restated to be internationally comparable. 2.1 CONTEXT: REGULATORY MINIMUM CAPITAL REQUIREMENTS All figures used to calculate New Zealand bank capital ratios have been drawn from the period from 1 July 2024 to 30 June 2025. During this period, New Zealand minimum capital requirements were set at a 9% CET1 ratio, 11.5% Tier 1 ratio and 13.5% Total Capital ratio for major banks. In 2019, the RBNZ released “Capital Review Decisions”28 that included an intention to increase capital ratios. This increase is being gradually phased in, 29 with the Capital Conservation Buffer increasing to 3.5% as of 1 July 2025, and new capital requirements by the end of 2028 requiring 13.5% CET1 ratio, 16% Tier 1 ratio and 18% Total Capital ratio for major banks. See Exhibit 6 below for further detail. 28 https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/consultations/banks/review-capital-adequacy-framework￾for-registered-banks/decisions/capital-review-decisions.pdf. 29 https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/regulation-and-supervision/banks/capital-review/2025/ updated-capital-review-implementation-timeline-reflecting-review-of-key-capital-settings.pdf. ADJUSTING NEW ZEALAND CAPITAL RATIOS TO MAKE AN INTERNATIONAL COMPARISON SECTION 2

© Oliver Wyman 22 Comparing New Zealand Bank Capital Ratios To International Peers Exhibit 6: Minimum New Zealand Capital Ratios — YoY changes highlighted in blue Minimum Value Component Description 1 July 2024 1 July 2025 1 July 2028 Pillar 1 requirement Standard CET1 Capital Requirement in line with Basel Pillar 1 standards. 4.5% 4.5% 4.5% Capital Conservation Buffer Additional buffer, introduced as part of Basel III reforms and implemented in New Zealand. 2.5% 3.5% 5.5% Countercyclical Buffer Additional buffer that can be increased or decreased in response to economic expansion or economic downturn. 0% 0% 1.5% D-SIB buffer Additional buffer to protect Domestically Systemically Important Banks. 2.0% (D-SIBs only) 2.0% (D-SIBs only) 2.0% (D-SIBs only) Total CET1 requirement 9.0% (D-SIBs) 7.0% (other banks) 10.0% (D-SIBs) 8.0% (other banks) 13.5% (D-SIBs) 11.5% (other banks) Additional Tier 1 requirement Additional buffer that can be satisfied with Tier 1 capital, in line with Basel Pillar 1 standards. 2.5% 2.5% 2.5% Total Tier 1 requirement 11.5% (D-SIBs) 9.5% (other banks) 12.5% D-SIBs) 10.5% (other banks) 16.0% (D-SIBs) 14.0% (other banks) Tier 2 requirement Additional buffer that can be satisfied with Tier 2 capital, in line with Basel Pillar 1 standards. 2.0% 2.0% 2.0% Total capital requirement 13.5% (D-SIBs) 11.5% (other banks) 14.5% (D-SIBs) 12.5% (other banks) 18.0% (D-SIBs) 16.0% (other banks) Note that the RBNZ typically does not impose additional regulatory buffers (e.g. “Pillar 2” add-ons) Source: RBNZ30 30 https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/consultations/banks/review-capital-adequacy-framework￾for-registered-banks/decisions/capital-review-decisions.pdf.

© Oliver Wyman 23 Comparing New Zealand Bank Capital Ratios To International Peers 2.2 ADJUSTING REPORTED BANK CAPITAL RATIOS When adjusted to be internationally comparable, New Zealand bank capital ratios increase. Our estimate for the magnitude of this increase is ~780 bps for the CET1 ratio. Exhibit 7: New Zealand capital ratios before/after adjustments to be internationally comparable RWA-weighted average capital ratios across ASB, ANZ, BNZ, WNZL and KiwiBank CET1 13.2% 21.0% +780bps 14.9% 23.7% 16.5% 26.1% Total tier 1 Total capital 2024 (Unadjusted) 2024 (Adjusted) Source: RBNZ, Public NZ Bank Data, Oliver Wyman analysis The increase in capital ratios to be internationally comparable is driven by many factors. The largest driver is an overlay to credit RWAs calculated under the IRB approach: RBNZ rules31 require that final IRB RWAs must be the greater of: • RWAs calculated under the IRB approach, increased by a scalar of 1.2, and • 85% of equivalent RWAs calculated under the standardised approach (an “output floor”). This approach is more conservative than the rules specified by the international Basel III standard and the Basel 3.1 reforms. It is also more conservative than the approach seen by peers in the international sample (see Exhibit 8 below). Exhibit 8: Comparison of IRB RWA overlays RWA scalar RWA output floor New Zealand 1.2 85% Basel III (before reforms) 1.06 (no floor) Basel 3.1 reforms (no scalar) 72.5% Australia 1.1 72.5% European countries, Canada, Singapore, Hong Kong (Aligned with Basel 3.1 standards as of 1 January 2025) (no scalar) Output floor being phased in; maximum value to be 72.5%. See Exhibit 5 for phase-in timelines. Source: Basel Committee on Banking Supervision, Public national regulator disclosures 31 BPR130 section C1.4, https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/regulation-and-supervision/banks/ banking-supervision-handbook/bpr130-credit-risk-rwas-1-july-2024pdf.

© Oliver Wyman 24 Comparing New Zealand Bank Capital Ratios To International Peers Other key areas where New Zealand’s bank capital rules are more conservative than international standards include more conservative rules for calculation of RWA for Farm Lending and Residential Mortgages under the IRB approach, and consideration of interest rate risk in the banking book under Pillar 1 capital requirements. See Exhibit 9 below.32 3334 32 The total adjustment is 780bps, however there is complexity in allocating impacts per-adjustment, because some adjustments overlap (e.g. the IRB RWA 1.2 scalar and other adjustments that affect IRB RWAs). See appendix A.2 for a discussion of how the total adjustment was allocated per-adjustment. 33 The impact for standardised approach to residential mortgage only applies to KiwiBank – this is discussed further in section 2.3. 34 Basel 3.1 reforms have introduced a new standardised operational risk framework (and no option for internal operational risk modelling). We calculate the Basel 3.1 requirement to be more conservative than the current RBNZ standardised approach for operational risk. The impact has not been included in adjusted capital ratios because data for most countries (e.g. European countries) was drawn from before the new standardised operational risk approach was implemented. For reference, capital ratios of New Zealand banks would decrease if the Basel 3.1 approach were applied, with impact on CET1 ratios being ~-60bps. Exhibit 9: Material adjustments made to New Zealand capital ratios, and impact to CET1 ratio Adjustments: See Appendix A for full descriptions of all adjustments % impact to CET1 ratio32 Adjustments to Capital Definition Deferred tax assets +0.5% Revaluation reserves +0.1% Total impact from Capital Definition Adjustments +0.6% Adjustments to Credit Risk Calculation Rules Farm lending LGD floors, minimum maturity dates and application of firm-size adjustments +1.3% Secured residential lending: LGD floors, PD overlays and correlation factor overlays +0.8% Specialised lending: Supervisory slotting approach +0.5% Apply standardised approach for sovereign and bank exposures of IRB banks +0.1% Currency threshold: for SME/Retail cut-off and firm-size adjustment application +0.6% Residential mortgage (standardised approach): higher risk weights for residential mortgages33 KiwiBank only Total impact from Credit Risk Requirement Adjustments +3.3% Adjustments for Credit Risk IRB Model Conservatism Non-retail CCF: Typically higher EAD estimates based on non-retail CCF +0.3% Unsecured non-retail LGD: Typically higher LGD values for unsecured non-retail +0.3% Total impact from Credit Risk IRB Model Conservatism +0.6% Adjustment for RWA Scalar and Output Floor RWA scalar: 1.2 scalar applied to total RWAs calculated under IRB approach +1.7% Output floor: Floor for IRB RWAs of 85% of RWAs under standardised approach +1.0% Total impact from RWA Scalar and Output Floor +2.7% Adjustment for Market Risk and Operational Risk Market risk: Inclusion of Interest Rate Risk in the Banking Book in Pillar 1 Requirements +0.6% Operational risk: RBNZ standardised approach less conservative than Basel 3.134 n/a Total +7.8% Source: RBNZ, Public NZ Bank Data, Oliver Wyman analysis

© Oliver Wyman 25 Comparing New Zealand Bank Capital Ratios To International Peers Calculating internationally comparable capital ratios is inherently complex and judgement is required (as discussed in section 1.2). We note two outside-in points of triangulation that suggests that it is reasonable for New Zealand capital ratios to increase on the order of ~780bps to be internationally comparable:

1. Comparison to Australian banks: Each Australian bank publishes, in annual investor presentations, internationally comparable capital ratios (see appendix B.1). These ratios include the Australian banks’ New Zealand subsidiaries and are, on average, ~600bps higher than reported capital ratios. These presentations also call out that, overall, RBNZ’s capital rules are more conservative than APRA’s. Australian banks also are not required to apply the RBNZ rules for a 1.2 scalar to RWAs and 85% output floor (instead using the Australian parameters of a 1.1 scalar and 72.5% output floor). It would therefore be expected that, when adjusting New Zealand capital ratios to be internationally comparable, the magnitude of the adjustment would be higher than 600bps.
2. Comparison to prior reports: The NZBA published reports in 2017 and 2019 (see section 1.4) with a 2019 estimate that, after adjusting to be internationally comparable, New Zealand capital ratios increase by ~520bps. This calculation was performed before the RWA 1.2 scalar and 85% output floor were introduced. It would be expected that, in 2025, New Zealand capital ratios would increase by more than 520bps after being adjusted to be internationally comparable. Appendix A contains further detail on key assumptions associated with each adjustment, and additional variations in RBNZ rules vs international Basel III standards that were identified but not modelled. 2.3 ADJUSTMENTS FOR NEW ZEALAND BANKS UNDER THE STANDARDISED APPROACH Most of the adjustments identified in Exhibit 9 above relate to risk-weighted assets calculated under the IRB approach. This short section discusses KiwiBank, the only bank in the New Zealand sample that does not use the IRB approach. KiwiBank’s reported CET1 ratio was 11.9% as of 30 June 2024; we estimate an adjusted ratio of 13.1%. The largest material adjustments are:
3. Conservative treatment of deferred tax assets (adds 40bps).
4. RBNZ’s conservative risk weights for mortgages under the standardised approach (adds 40 bps).
5. Consideration of IRRBB in Pillar 1 requirements under market risk (adds 40 bps).

© Oliver Wyman 26 Comparing New Zealand Bank Capital Ratios To International Peers Under pre-2017 Basel III international standards, residential mortgages have a minimum risk weight of 35%.35 Under the Basel 3.1 reforms, new standardised risk weights were introduced for mortgages that shift by LVR band and have a minimum risk weight of 20%.36,37 As an alternative point of reference, we have calculated the impact if KiwiBank used the Basel 3.1 standard risk weights (noting these were not used e.g. in Europe in our 2024 Pillar 3 data). Under this scenario, KiwiBank’s adjusted capital ratio is estimated to be 14.8% (i.e. an additional 170bps increase). 2.4 FORECAST 2028 INTERNATIONALLY COMPARABLE CAPITAL RATIOS As stated in section 2.1, the RBNZ has proposed increases to minimum capital requirements to be gradually introduced through to 2028. These proposals add 4.5% to held CET1 minimums versus FY25 minimum levels (this also flows through to increases of 4.5% to Tier 1 capital and Total capital minimums). This report compares New Zealand’s held capital in 2024 versus international peers, nonetheless, forecast capital ratios for New Zealand’s banks in 2028 are an important point of context. We have therefore sought to restate predicted 2028 capital ratios for New Zealand banks on an internationally comparable basis. To do this, a scenario is needed for what reported capital levels will be in New Zealand in 2028. New Zealand banks currently have substantial buffer above minimum capital requirements; this is likely in anticipation of future capital increases. Therefore, in our view, it is not reasonable to use a scenario where reported capital ratios increase by the full 450bps increase in minimum requirements. Rather, we have used the following scenario, that, by July 2028: • CET1 reported ratios increase by 250bps (from 13.2% to 15.7%) • Tier 1 reported ratios increase by 300bps (from 14.9% to 17.9%) • Total capital reported ratios increase by 350bps (from 16.5% to 20.0%) • RWAs are identical to FY25 35 See e.g. Article 125 of the Capital Requirements Regulation (CRR) — Regulation (EU) No 575/2013. These risk weights were seen in the 2024 Pillar 3 data used for relevant banks in the peer sample (e.g. from Europe). 36 Basel CRE20, section 20.82, https://www.bis.org/basel_framework/chapter/CRE/20.htm. 37 For the four major banks, the 85% output floor is calculated using RBNZ’s current standardised risk weights for retail mortgages, which are higher than the standardised risk weights under the Basel 3.1 reforms. The output floor impact would also decrease if RBNZ standardised risk weights were in-line with Basel 3.1 risk weights for residential mortgages.

© Oliver Wyman 27 Comparing New Zealand Bank Capital Ratios To International Peers This scenario yields adjusted capital ratios for 2028 of 25.0% (CET1), 28.4% (Tier 1 capital) and 31.6% (Total capital). See Exhibit 10 below. Any comparison of New Zealand’s 2028 forecast to other countries should be done in the context that many other countries have planned changes to capital rules (e.g. phase-in of Basel 3.1 regimes) that may also increase capital requirements. Exhibit 10: New Zealand forecast capital ratios in 2028 Minimum requirement Management buffer Internationally comparable ratio Tier 1 2024 - Unadjusted 2024 - Adjusted 2028 - Unadjusted 2028 - Adjusted 3.4% 14.9% 23.7% 11.5% 17.9% 28.4% 16.0% 1.9% Total capital 2024 - Unadjusted 2024 - Adjusted 2028 - Unadjusted 2028 - Adjusted 3.0% 16.5% 13.5% 26.1% 20.0% 31.6% 18.0% 2.0% CET1 2024 - Unadjusted 2024 - Adjusted 2028 - Unadjusted 2028 - Adjusted 4.2% 13.2% 21.0% 9.0% 15.7% 25.0% 13.5% 2.2% Source: RBNZ, Public NZ Bank Data, Oliver Wyman analysis

© Oliver Wyman 28 Comparing New Zealand Bank Capital Ratios To International Peers In this section, capital ratios for banks in ten peer countries are restated to be internationally comparable, to the extent possible given data availability. Capital ratios for these countries are then compared with New Zealand capital ratios. 3.1 SELECTION OF PEER SET Ten peer countries comparable to New Zealand have been analysed for detailed comparison of capital ratios. A four-step process was used to select these peer countries: • First, countries with populations between 3 and 50 million and GDP per capita above $30,000 USD (as of June 2025, World Bank data) were shortlisted, resulting in 19 candidates with broadly similar economic scale and complexity to New Zealand. The shortlist consisted of Australia, Sweden, Canada, Belgium, Israel, Ireland, Hong Kong, Denmark, Singapore, Finland, Switzerland, Czechia, Saudi Arabia, the Netherlands, UAE, Norway, Kuwait, Spain and Austria. • Second, countries with fundamentally different economies or banking systems — specifically Kuwait, UAE, Saudi Arabia (due to high state ownership and differing fiscal dynamics), and Switzerland (due to its highly concentrated banking sector) — were removed. • Third, to avoid overrepresentation of European participants and ensure a balanced comparison, only four European countries (Belgium, Sweden, Norway, and Ireland) were retained based on diversity, similarity to New Zealand, and data availability, while others were excluded. • Finally, the United Kingdom was added as a widely recognised comparator with a mature financial sector. This process resulted in a final peer group of 10 countries: Australia, Canada, Israel, Hong Kong, Singapore, Sweden, Belgium, Ireland, the United Kingdom, and Norway. COMPARISON BETWEEN NEW ZEALAND AND PEER COUNTRIES SECTION 3

© Oliver Wyman 29 Comparing New Zealand Bank Capital Ratios To International Peers 3.2 IDENTIFIED VARIATIONS IN CAPITAL DEFINITION AND RWA CALCULATION Regulators have several areas of national discretion to apply conservatism versus the international Basel III standard (these areas of discretion were outlined in section 1.1). Based on our analysis, Australia and New Zealand regulatory regimes appear to use these areas of discretion more than international peers:3839 When examining per-country variations (see Exhibit 12 below), key findings are: • Australia has many material variations versus international Basel III standards, with cumulative impact to CET1 ratios of ~600bps after adjustments are made to make capital ratios internally comparable. • Some variations versus international standards are seen for other countries, but the total number and impact is smaller. The largest adjustment among countries other than Australia is Hong Kong, which saw an increase of 220bps (CET1) after adjusting for a narrower definition of CET1 capital. 38 European countries are less conservative in rules for risk-weighted assets through rules that reduce RWAs for SME and Infrastructure exposures by ~25%. 39 The United Kingdom has the same SME and Infrastructure supporting factor as Europe, as well as a more conservative rule that requires mandatory slotting for certain specialised lending exposures. Exhibit 11: Application of variations for New Zealand and peer countries Area of discretion (as per section 1.1) New Zealand Australia Canada Hong Kong Singapore Isreal Norway Sweden Ireland Belgium United Kingdom

1. Narrower or broader definitions of what counts as capital to absorb losses. ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑
2. Variations in rules for how risk-weighted assets are calculated (e.g. different standardised risk weights) ↑ ↑ ↑ ↑ ↓38 ↓ ↓ ↓ ↑↓39
3. Different outcomes from the internal models that banks can use to calculate their risk-weighted assets ↑ ↑ Limited visibility
4. Different minimum capital requirements (e.g. additional Pillar 2 capital requirements and supervisory buffers) ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ More conservative ↓ Less conservative Source: Oliver Wyman analysis of public information on capital rules per jurisdiction

© Oliver Wyman 30 Comparing New Zealand Bank Capital Ratios To International Peers It should be noted that peer countries may use regulatory discretion to require more conservative IRB models vs international standards, and such variations have not generally been identified or adjusted for because they are often not public. See Appendix B for further detail on how variations were identified and modelled for each peer country, including key assumptions Exhibit 12: Variations vs Basel III standard for peer countries and impact to CET1 ratio Country Impact to CET1 ratio Variations identified Comments Canada +0.0% • No material variations identified in pre-Basel 3.1 reforms • Canada has implemented a national version of the Basel 3.1 reforms as of Q2 2023. (see appendix B.2 for further discussion) Singapore +0.2% • Mandatory slotting for specialised exposures is required under Singapore rules (not Basel) • Singapore has implemented a national version of the Basel 3.1 reforms as of July 2024; Singapore data used as of end-June 2024 Hong Kong +2.2% • Full deduction of deferred tax assets instead of partial deduction of threshold-met DTA • Exclusion of fair value gains arising from the revaluation of land and buildings (not the case under Basel rules) • Hong Kong has implemented a national version of the Basel reforms as of January 2025; Hong Kong data used as of end-December 2024 Australia +6.0% • Extensive list of variations covering Capital Definition, Credit Risk RWA rules, Market Risk RWA rules and RWA output floors • See appendix B.1 for details • Australian variations are listed and quantified by the banks themselves; this report uses these quantifications • See appendix B.1 for further discussion Israel +1.2% • Different standardised risk weights for residential mortgages • Although the IRB approach is permitted under Israel capital rules, all Israel banks in the sample use the standardised approach Norway +2.0% • Foreseeable dividends are excluded under EU rules (not Basel) • EU rules reduce SME and Infrastructure exposures by ~25% • European banking rules are very similar across jurisdictions; however, capital ratios themselves (as well as review and approval of IRB models) can be quite different • Although Norway and Sweden have different regulators versus the EU, in practice, capital rules are set very similarly in these jurisdictions • Non-material variations identified were differences in standardised risk weights and exclusions for certain CVA exposures (latter judged not material due to peer banks asset mix) Belgium +0.0% Ireland +0.3% Sweden +0.9% United Kingdom +0.6% • Foreseeable dividends are excluded under United Kingdom rules (not Basel) • United Kingdom rules reduce SME and Infrastructure exposures by ~25% • Mandatory slotting for specialised exposures is required under United Kingdom rules (not Basel) • The United Kingdom has similar capital requirements to the European Union (though mandatory slotting was identified as an exception to this) Source: Oliver Wyman analysis of public information on capital rules per jurisdiction

© Oliver Wyman 31 Comparing New Zealand Bank Capital Ratios To International Peers 3.3 INTERNATIONAL COMPARISON OF CAPITAL RATIOS On an internationally comparable basis, New Zealand capital ratios are currently higher than most peer countries, but slightly lower than Norway, as per Exhibit 13 below. Adjusting capital ratios to be internationally comparable is inherently complex and requires judgement; we note that the differences between average CET1 ratios for Norway, New Zealand, Hong Kong and Sweden are small in the context of the approximate nature of this comparison. 40 In all cases, country CET1 ratios are the weighted average (by RWA) of major banks, with ‘major’ defined as having

10% market share. See Exhibit 12 for adjustments to each country. 41 Note that Australian figures include their New Zealand subsidiaries, with capital calculated under Australian capital rules. Exhibit 13: International comparison of CET1 ratios for New Zealand and peer countries40,41 Unadjusted New Zealand Australia Adjusted Norway New Zealand Hong Kong Sweden Australia Ireland Singapore Belgium United Kingdom Canada Israel 12.8% 13.7% 14.3% 14.3% 14.8% 15.2% 18.3% 19.4% 19.7% 21.0% 21.4% 13.2% 12.3% Source: RBNZ, Pillar 3 and financial reports, Oliver Wyman analysis Most adjustments to internationally comparable ratios affect calculation of RWAs. The three capital ratios (CET1, Tier 1, Tier 2) have different numerators, but the same denominator (total RWAs). Therefore, comparison across all three ratios yields a similar ranking in countries to comparison of CET1 ratios (see Exhibit 14 below).

© Oliver Wyman 32 Comparing New Zealand Bank Capital Ratios To International Peers Australia holds high Tier 2 capital relative to international peers in the sample. This is possibly in anticipation of rules that will come into effect from 1 January 2026 that add an additional 4.5% Total Capital requirement for major Australia Banks, and an additional decision from APRA that will replace the current requirement to hold 1.5% “Additional Tier 1” capital with a requirement to hold 1.25% more Tier 2 capital and 0.25% more CET1 capital.42 Australia is introducing this requirement as an alternative to a Total Loss-Absorbing Capacity Requirement (discussed further in section 3.4). Exhibit 14: International comparison of CET1, Tier 1 and total capital ratios for New Zealand and peer countries New Zealand Australia Norway Hong Kong Sweden Ireland Singapore Belgium United Kingdom Canada Israel 29.8% 26.1% 25.7% 23.9% 21.2% 20.6% 19.8% 18.6% 17.9% 17.6% 18.3% 2.8% 8.7% 21.0% 2.6% 2.5% 21.4% 1.8% 2.5% 19.4% 2.0% 2.5% 19.7% 0.8% 14.3% 2.7% 3.6% 15.2% 1.9% 2.7% 14.8% 2.1% 14.3% 2.2% 13.7% 1.8% 2.1% 12.8% 3.1% 16.0% 0.7% 1.4% 1.7% CET1 % Additional tier 1% Tier 2%  Source: RBNZ, Pillar 3 and financial reports, Oliver Wyman analysis 42 See https://www.apra.gov.au/finalising-loss-absorbing-capacity-requirements-for-domestic-systemically-important￾banks and https://www.apra.gov.au/news-and-publications/apra-to-phase-out-at1-as-eligible-bank-capital.

© Oliver Wyman 33 Comparing New Zealand Bank Capital Ratios To International Peers 3.4 COMPARISON OF TOTAL LOSS-ABSORBING CAPACITY REQUIREMENTS In addition to the three core capital metrics (CET1 capital, Tier 1 capital and Total Capital), one can compare banks according to their Total Loss-Absorbing Capacity (TLAC). TLAC acts over-and-above Total Capital, to reduce the risk of contagion in the event that a global systemically important bank fails and enters resolution. Exhibit 15 below compares held TLAC values for relevant countries. The BCBS maintains a 2016 TLAC standard, 43 and national implementation of TLAC rules vary. Specifically, among the countries considered in this report’s peer set: • New Zealand, Israel and Singapore have not introduced TLAC requirements; Total Capital is included in Exhibit 15 for comparison. It should be caveated that some banks in these countries may issue instruments that would be classified as TLAC but are not reported as such in Pillar 3 reports. • Australia does not have a separate requirement for TLAC (as opposed to Total capital), but (as discussed in section 3.3) will introduce an additional 4.5% Tier 2 capital requirement that will take effect from 2026. • Hong Kong, Canada, European countries and the UK have introduced requirements broadly comparable to the Basel TLAC standard. In Europe and the UK, the requirement is instead called the “Minimum Requirements for own funds and Eligible Liabilities” (MREL) framework.44 Minimum requirements for held TLAC or equivalent capital often vary on a bank-by-bank basis; this report has compared reported TLAC per-bank as disclosed in Pillar 3 reports, and not considered drivers (e.g. per-bank TLAC or MREL requirements and how these have been determined). The conclusion relevant to this report is that, although New Zealand banks have higher core capital ratios than many international peers, some peers have an additional TLAC buffer for systemically important banks (in the event of banking failure) that is not used by Australian or New Zealand banks. 43 https://www.bis.org/bcbs/publ/d387.htm. 44 See e.g. https://www.srb.europa.eu/system/files/media/document/MREL%20Policy%202024_clean%20version_web.pdf

© Oliver Wyman 34 Comparing New Zealand Bank Capital Ratios To International Peers Exhibit 15: Held TLAC (or total capital) ratio for New Zealand and peer countries45 All figures adjusted to be internationally comparable Sweden 45.5% Norway 36.9% United Kingdom 33.5% Ireland 31.9% Canada 30.9% Belgium 29.9% Australia 29.8% Hong Kong 26.7% New Zealand 26.1% Singapore 18.6% Israel 16.0% Separate TLAC requirement Total capital Source: RBNZ, Pillar 3 and financial reports, Oliver Wyman analysis 45 For UK banks, TLAC figures for the Group entity (as opposed to the ring-fenced retail bank) have been used.

© Oliver Wyman 35 Comparing New Zealand Bank Capital Ratios To International Peers 3.5 COMPANION ANALYSIS: CAPITAL COVERAGE RATIOS As companion analysis, we can also calculate “capital coverage ratios” for New Zealand banks and banks in the ten peer countries. Capital Coverage Ratios are an alternative measure to compare the level of capital that banks hold. The measure represents the amount of capital that is held per $100 of lending. As an illustrative example with hypothetical numbers: Total mortgage exposure: $500 million Mortgage RWA: $200 million CET1 capital ratio: 10% Held CET1 capital for mortgages: 10% × $200 million = $20m Capital coverage ratio: $20 million × 100 = $4.00 $500 million The advantage of this metric is that it captures all national variation in credit RWA calculation, including applying the standardised vs IRB approach. The disadvantages of the metric are: • It also captures all differences in underlying risk profile of each bank’s assets (e.g. one bank may have more defaulted exposures). • It does not take into account additional targeted Pillar 2 capital buffers, i.e. those which allocate additional capital to a specific risk (rather than evenly across asset classes). We have calculated the capital coverage ratios for New Zealand and each of the ten countries in the peer sample, using as inputs the actual exposures, RWAs and capital ratios for banks. As per the exhibit 16 below, New Zealand capital coverage ratios are: • Lower than Israel and Ireland. Key drivers are high use of standardised RWA calculations for banks in these countries and, in Ireland’s case, the severity of the GFC-era loss experience driving up IRB model parameters (these factors are not adjusted for when making capital ratios internationally comparable). • Lower than Norway, supporting the conclusion Norway banks have higher capital ratios than New Zealand banks. • Lower than Singapore specifically for non-retail, but higher for retail. • Higher than all other countries. Overall, in our view, this supports the conclusion that New Zealand bank capital ratios are higher than the majority of peer countries, but lower than some comparable banks for some metrics.

© Oliver Wyman 36 Comparing New Zealand Bank Capital Ratios To International Peers Exhibit 16: Capital coverage ratios for retail and non-retail asset classes, for New Zealand and 10 peer Countries New Zealand Australia Norway Hong Kong Sweden Ireland Israel Belgium Canada United Kingdom Singapore Retail Non-retail Singapore $6.8 Israel $6.4 Norway $6.4 Ireland $5.5 New Zealand $5.3 Hong Kong $5.2 Belgium $5.1 Canada $4.2 $6.3 $5.2 $4.6 $4.0 $3.1 $2.2 $2.1 $2.0 $1.8 $1.7 $1.6 Sweden $4.1 Australia $3.9 United Kingdom $3.6 Source: RBNZ, Pillar 3 and financial reports, Oliver Wyman analysis

© Oliver Wyman 37 Comparing New Zealand Bank Capital Ratios to International Peers Comparing New Zealand capital ratios to a set of ten peer countries has found New Zealand’s banks to have higher capital ratios than the majority of banks in these peer countries, though lower capital ratios than some peer banks. This section compares New Zealand capital ratios to larger sample sizes of banks, to further triangulate this conclusion. 4.1 COMPARISON AGAINST BASEL III MONITORING REPORT DATASET Regular Basel III Monitoring reports provide capital data for a large sample of global banks. We used the March 2025 sample, 46 which includes data for 176 banks, all of which are in BCBS member countries (this includes Australian banks, and therefore their New Zealand subsidiaries, but not New Zealand banks as standalone entities). Using this dataset has the advantage of comparing to a much larger sample of banks. The disadvantage is that it is not possible to adjust such a large scale of reported ratios to be under a common set of capital rules. The BCBS report considers two cohorts of banks: Group 1 banks (internationally active banks with Tier 1 capital of more than €3 billion) and Group 2 banks (all other banks). We find that, after adjusting New Zealand bank capital ratios to be internationally comparable, New Zealand banks are in the top quartile of Group 1 banks, and the 50th-75th percentile versus Group 2 banks (see Exhibit 17 below).47 Results are broadly similar when comparing Tier 1 capital and Total Capital Ratios (see Exhibit 18). 46 https://www.bis.org/bcbs/publ/d592.htm. 47 New Zealand’s major banks have over €6 billion Tier 1 capital and so formally qualify as Group 1, however, Group 1 also includes very large G-SIB banks, which are less comparable to New Zealand banks. Group 2 banks, though smaller, are arguably also comparable to locally-focused New Zealand banks. Therefore, we compare New Zealand banks to both Group 1 and Group 2 banks. COMPARISON AGAINST LARGE-SCALE COUNTRY SET SECTION 4

© Oliver Wyman 38 Comparing New Zealand Bank Capital Ratios to International Peers Overall, this comparison supports the conclusion that New Zealand’s banks have higher capital ratios than the majority of international peer banks, but lower than some international peer banks. Exhibit 17: CET1 Capital Ratios, New Zealand (adjusted) versus (unadjusted) Basel III Monitoring report dataset Group 1 Banks Group 2 Banks New Zealand (adjusted) 21.0% 25.7% 18.1% 14.8% 15.7% 14.0% 12.7% 25th percentile Median 75th percentile Source: Basel Committee on Banking Supervision, RBNZ, Oliver Wyman analysis Exhibit 18: Tier 1 Capital and Total Capital Ratios, New Zealand (unadjusted) versus Basel III (unadjusted) Basel III Monitoring report dataset) 25th percentile Median 75th percentile Total Capital 23.7% 25.8% 18.1% 15.6% 17.2% 15.6% 14.3% 26.3% 26.1% 20.9% 18.2% 19.8% 18.0% 16.2% Tier 1 Capital Group 1 Banks Group 2 Banks New Zealand (adjusted) Group 1 Banks Group 2 Banks New Zealand (adjusted) Source: Basel Committee on Banking Supervision, RBNZ, Oliver Wyman analysis

© Oliver Wyman 39 Comparing New Zealand Bank Capital Ratios to International Peers 4.2 COMPARISON AGAINST S&P GLOBAL RATINGS RISK-ADJUSTED CAPITAL RATIOS S&P Global Ratings produce Risk-Adjusted Capital Ratios for the top 200 banks that it rates globally.48 These ratios are produced by sourcing financial data for banks on exposures and financial instruments, and calculating held “common equity tier 1 capital” and “risk-weighted assets” using a globally consistent methodology. Risk-Adjusted Capital ratios are explicitly a different metric to the reported CET1 ratios, but provide an internationally consistent way to compare bank levels of capital. It is therefore possible to compare New Zealand RAC ratios to other bank RAC ratios, such that all metrics are calculated on a consistent basis. When comparing the weighted average New Zealand RAC ratios to published RAC ratios for 200 large banks, New Zealand’s RAC ratio is above the 75th percentile (see Exhibit 19 below). The group of banks included in the RAC sample contains many very large G-SIBs, as well as less mature banks, so not all banks in the sample are similar to New Zealand’s banks. We see this comparison as also supporting the conclusion that New Zealand’s banks have higher capital ratios than the majority of international peer banks, but lower than some international peer banks. Exhibit 19: Comparison of New Zealand RAC ratio (weighted average of four major banks) to Top 200 Global Banks S&P Top 200 Banks New Zealand (adjusted) 25th percentile Median 75th percentile 11.7 12.6 9.9 8.0 Source: S&P Global Ratings, Oliver Wyman analysis 48 The full methodology and dataset is not public but see e.g. https://www.spglobal.com/ratings/en/regulatory/article/-/ view/sourceId/13060013.

© Oliver Wyman 40 Comparing New Zealand Bank Capital Ratios to International Peers This report set out to provide an independent benchmarking of New Zealand banks’ capital ratios against those of peer countries. There are limitations and inherent complexities in any such international comparison (see section 1.2). With these complexities in mind, the analyses considered in section 2, 3 and 4 of this report collectively suggest that: • New Zealand banks’ capital rules have multiple areas of conservatism versus Basel III international standards. • New Zealand CET1 ratios, if adjusted to be comparable to international peers, would increase by an estimated ~780bps. • After adjusting New Zealand’s capital ratios to be internationally comparable, New Zealand bank capital ratios are higher than the majority of global peers (particularly for CET1 capital). • However, New Zealand bank capital ratios are lower than some peer banks for some metrics (see e.g. TLAC in section 3.4 and capital coverage ratios in section 3.5). These results are directionally aligned with previous studies (e.g. the 2017 and 2019 reports commissioned by the NZBA). This report’s conclusions are an input to RBNZ’s broader review of capital settings, which will consider to what extent this variation is commensurate with local characteristics of New Zealand’s financial system and risk profile. OVERALL CONCLUSIONS

© Oliver Wyman 41 Comparing New Zealand Bank Capital Ratios to International Peers A.1 FURTHER DETAIL ON MATERIAL ADJUSTMENTS AND KEY ASSUMPTIONS Adjustment Key assumptions made % impact to CET1 ratio49 Adjustments to capital definition Deferred tax assets RBNZ rules require DTAs to be deducted in full from CET1 capital; under Basel rules, DTAs which meet a threshold treatment can be included. • Assumed all “DTA less DTL relating to temporary difference” reported in annual reports meet Basel rule for inclusions. +0.5% Revaluation reserve RBNZ rules require that all revaluation reserves of tangible fixed assets, foreign currency translation reserves, and reserves arising from revaluation of security holdings to be included in Tier 2 capital; under Basel rules, these can be included in CET1 capital. • Reclassified asset revaluation reserve amount from Tier 2 capital to CET1 capital. +0.1% Adjustments to credit risk requirements Farm lending RBNZ imposes separate rules for farm lending (as distinct from other corporate exposures) regarding LGD floors, no firm-size adjustment and a minimum maturity date of 2.5 years; under Basel rules, there is no specific treatment for farm lending. • Assumed 100% of businesses under “Farm Lending” are subject to firm size adjustment. • Assumed average firm size of ~NZD$2 Million turnover. • New maturity assumed to be ~1.5 years. • Proxied LGD curve based on an even distribution using Basel floor of 5% for retail exposures and average IRB banks ceiling ~45% in RCAP hypothetical credit exercise. This gives us an arithmetic average LGD of ~25%. This was compared to RBNZ stress test average in a Very Severe Scenario of ~30%. +1.3% 49 See appendix A.2 for a discussion of how the total adjustment was allocated per-adjustment. LIST OF NEW ZEALAND VARIATIONS VERSUS INTERNATIONAL APPROACH APPENDIX A

© Oliver Wyman 42 Comparing New Zealand Bank Capital Ratios to International Peers Adjustment Key assumptions made % impact to CET1 ratio49 Secured residential lending RBNZ rules apply conservative floors on LGD values, specify correlation factors of 0.15 or higher, and may impose additional regulatory overlays when banks calibrate their PD estimates; under international practice a 10% floor for LGD is prescribed for secured mortgages.50 • Calculated initial correlation value using RBNZ LGD by LVR bands as detailed in Table “Minimum LGD for residential mortgage loan” and Table “Correlation for residential mortgage loans”. • Calculated initial LGD using individual bank’s data; LGD adjustments calculated with reference to international standard Basel floor of 10%51, and assumed no changes to other increments in RBNZ prescribed minimum LGD by LVR bands for residential mortgage loan. • Impacts resulting from PD have not been quantified. +0.8% Specialised lending RBNZ rules require banks to apply the supervisory slotting approach to specialised lending (SL) exposures, which produces a more conservative outcome than the IRB equation. Under Basel rules, use of the IRB equation is allowed if banks’ internal estimates meet the requirements. • Mapped slotting category using Table “Supervisory category and external rating equivalents” and assumptions on PD by supervisory slotting for typical PDs/observed default rates for these external ratings. This gives a PD band of 0-0.55% for Strong; 0.55%- 1.56% for Good; 1.56%-3.72% for Satisfactory; 3.72%-99.99% for Weak, and 100% for Default. +0.5% Apply standardised approach for sovereign and bank exposures of IRB banks RBNZ rules require the use of the standardised approach for sovereign and bank exposures; under Basel rules, the framework allows for the IRB approach for corporate, sovereign, and bank exposures. • Used proxy using External Credit Risk Assessment Approach (ECRA) starting from 20%, 30%, 50%, 100%. +0.1% Currency threshold RBNZ rules specify certain cut-offs (e.g. SME versus Retail exposures cut off at 1 million NZD) that are mapped from Euros (under Basel rules) to NZD on a 1:1 basis. If they were converted using exchange rates, these thresholds would be higher. This is applicable in three places: The cut-off between SME and Retail asset classes Cut-off for firms subject to a firm-size adjustment for IRB modelling Maximum exposure for retail revolving exposures • Did not model retail revolving exposure variation due to its immaterial impact. • Assumed the number of firms within the lending class is evenly distributed, and the relationship between business size and average loan size is linear. • Adjusted correlation factors to include firm size under NZD$88 million (EUR50 million). +0.6% Retail Mortgage (standardised approach) RBNZ rules require that risk weights for retail mortgages are determined by levels of LVR, typically set at 35% or higher; under Basel rules, retail mortgages also have a minimum of 35% but do not increase by LVR band. • Assumed KiwiBank LVR distribution based on LVR distribution from four major banks. • Kiwibank is the only impacted bank. • KiwiBank’s CET1 ratio is increased by 40 bps. See section 2.3 for further discussion. KiwiBank only 50 Note that although Basel 3.1 rules and APRA rules permit an LGD floor of 5%, most international banks (e.g. in Europe) have an LGD floor of 10% as of 2024. If an LGD floor of 5% was used instead for this adjustment, the impact of this adjustment would be 150bps. Impacts resulting from PD overlays have not been quantified. 51 See e.g. Article 164(4) of the Capital Requirements Regulation (CRR) — Regulation (EU) No 575/2013, in force in 2024.

© Oliver Wyman 43 Comparing New Zealand Bank Capital Ratios to International Peers Adjustment Key assumptions made % impact to CET1 ratio49 Adjustments for credit risk IRB model conservatism Non-retail CCF RBNZ-approved models typically result in higher EAD estimates than the international norm; under Basel rules, the framework permits the use of internal models to calculate the credit conversion factor (CCF). • Applied scalar to address EAD conservatism in NZ approved model using proxy from Basel RCAP hypothetical credit exercise. +0.3% Unsecured non-retail LGD RBNZ-approved models typically result in higher LGDs than the international norm; under Basel rules, LGDs for unsecured corporate exposures must be greater than 25% in an advanced model or 40% in the FIRB approach. • Calculated the proportion of lending that is unsecured by bank. • Applied a LGD ceiling of 45%, which is consistent with APRA’s International capital comparison study in 2015 and Basel RCAP hypothetical credit exercise. +0.3% Adjustment for RWA scalar and output floor RWA Scalar RBNZ rules require that IRB-calculated RWAs must be increased by a 1.2 scaling factor. Under Basel III rules, the scalar is 1.06. • Recalculated IRB RWA component using 1.06 scalar. • Note that per-adjustment impact from other adjustments includes the impact of the 1.2 scalar; impact in this row is after all other adjustments have been applied. +1.7% Scaling factor and output floor for IRB credit risk RBNZ rules require cannot be lower than 85% of RWA calculated under the standardised approach (an “output floor”). In many international countries, RWA output floors are being slowly phased in; we have modelled the adjustment if no output floor were applied. • Removed the application of the output floor. +1.0% Adjustments for market risk Market risk The Basel framework manages interest rate risk in the banking book (IRRBB) through a Pillar 2 add-on. In New Zealand, IRRBB is included in RWAs and in Pillar 1 capital requirements. • Applied proxy of parent’s IRRBB % to non￾traded component, this NZ IRRBB is then removed from the capital calculations. • Excluded traded component given data limitations. +0.6% Operational risk Basel 3.1 reforms have introduced a new standardised operational risk framework (and no option for internal operational risk modelling)52. We calculate the Basel 3.1 requirement to be more conservative than the current RBNZ approach.53 • Not included in adjusted ratio because the Basel 3.1 approach has not been adopted in many countries including European countries as of 2024 (year of most publicly available Pillar 3 data). • For reference, capital ratios of New Zealand banks would decrease if the Basel 3.1 approach were applied, with impact on CET1 capital ratios being ~-60bps. n/a Source: RBNZ, Public NZ financial reports, Oliver Wyman analysis 52 OPE25, https://www.bis.org/basel_framework/chapter/OPE/25.htm. 53 BPR150, https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/regulation-and-supervision/banks/banking￾supervision-handbook/bpr150-standardised-operational-risk-1-july-2024pdf.pdf.

© Oliver Wyman 44 Comparing New Zealand Bank Capital Ratios to International Peers A.2 COMMENTARY ON PER-ADJUSTMENT IMPACTS The total impact of many adjustments, when applied simultaneously, is not always equal to the sum of the impacts of each adjustment applied in isolation. This is for multiple reasons, e.g.: • Many adjustments impact RWAs, which is the denominator of any capital ratio. Multiple adjustments to RWAs do not scale linearly. • The 1.2 IRB RWA scalar adjustment overlaps with other adjustments that impact IRB RWA calculations. • The 85% output floor overlaps with other adjustments that impact credit risk RWA calculation. To calculate the total impact of all adjustments (e.g. a 780bps increase to the New Zealand banks’ CET1 ratio when it is made internationally comparable), we have recalculated both capital and RWAs under the impact of all adjustments applied simultaneously.54 The per-adjustment impacts have been calculated so that they sum to the total impact of all adjustments applied simultaneously. To do this, the relative magnitude of each individual adjustment (applied in isolation) was calculated; the total impact was then distributed to each adjustment proportional to its relative magnitude when applied in isolation. The impact of each individual adjustment was calculated assuming that the output floor was not in place. The impact of the 1.2 IRB RWA scalar was calculated assuming all other IRB RWA variations (e.g. farm lending, secured residential lending) had already been adjusted for. 54 When adjustments overlap (e.g. the 1.2 RWA scalar and other IRB RWA adjustments), we have ensured that adjustments are not “double-counted”.

© Oliver Wyman 45 Comparing New Zealand Bank Capital Ratios to International Peers A.3 ADDITIONAL ADJUSTMENTS THAT HAVE NOT BEEN MODELLED We have not modelled the following adjustments due to materiality. We acknowledge that this set of adjustments, when taken in aggregate, could lead to additional changes to adjusted New Zealand capital ratios. This is also true for peer countries (for which only material variations were modelled) and is an inherent limitation when internationally comparing capital ratios. • Remove contractual contingency from definition of capital: Contractual contingency refers to provisions in capital instrument that allows for the suspension or cancellation of interest or dividends under certain conditions. Per Basel, this can be included in AT1 (high-trigger Contingency Convertibles) and T2 (low-trigger). This was not modelled due to limited data availability on capital instrument provisions, and expected to be non￾material on New Zealand banks. • Accept redeemable perpetual preference shares as AT1 capital: Not modelled due to no impact on New Zealand banks, and difficult to quantify with confidence. For NZ banks, redeemable perpetual preference shares are already included in their AT1 capital, as per annual reports. • Accept long-term subordinated debt as Tier 2 capital: Not modelled due to no impact on New Zealand banks in sample, and difficult to quantify with confidence. For NZ banks, certain subordinated debt are already included as Tier 2 capital, as per annual reports. • Goodwill and other intangibles: Not modelled due to no impact on New Zealand banks in sample, no DTL associated with goodwill and other intangibles documented were identified in their annual reports. • Credit enhancement: Not modelled due to no impact on New Zealand banks in sample. For NZ banks in sample, no credit enhancements to affiliated insurance groups or fund management and securitisation vehicles were identified in their annual reports. • Funding to affiliated/associated groups: Not modelled due to no impact on New Zealand banks in sample. For NZ banks in sample, there was no funding provided to affiliated or associated groups. • Advance to connected persons: Not modelled due to no impact on New Zealand banks in sample. For NZ banks in sample, there was no advances to connected persons identified in their annual reports. • Holding of own shares: Not modelled due to no impact on New Zealand banks in sample. For NZ banks in sample, there were no holdings of own shares identified in their annual reports • Reverse mortgages: Not modelled due to no impact on New Zealand banks in sample. No NZ banks in sample have reverse mortgages identified in their Capital Satellite Survey. • Holdings of financial institution capital: Not modelled due to no material impact on New Zealand banks in sample, due to no holdings in its own shares nor holdings of financial institution capital.

© Oliver Wyman 46 Comparing New Zealand Bank Capital Ratios to International Peers • Local government: RBNZ requires public sector entities, including local authorities and local government funding agencies, to be mapped to the bank exposure class, which is then risk-weighted using the sovereign rating grade with a minimum risk weight of 20%; under Basel rules, there is discretion to risk-weight public sector entities as either sovereign or bank asset classes. This was initially modelled, but excluded from the final list of adjustments due to small impact. • Retail exposures (Standardised approach): RBNZ rule require that all retail exposures, excluding residential mortgage loans, to apply a 100% risk weight; under Basel rules, retail exposures are required to apply a 75% risk weight. This was not modelled due to data availability, but it is noted that this impacts the standardised RWA calculation that determines RBNZ’s 85% output floor. • Securitisation: Not modelled due to its immateriality, as it is not expected to consist of a material proportion of total assets. Identifying “externally securitised assets” within the financial statements poses challenges, as they may constitute a subset of corporate and financial institution securities. • Point of non-viability: New Zealand AT1 and Tier 2 securities specifically do not include “Point Of Non-Viability” (PONV) terms and conditions. Not modelled due to data availability on such securities. • Traded market risk: The traded component of market risk is excluded due to data limitations. For New Zealand banks, the non-traded interest rate risk in the banking book is expected to by the majority of total market risk, as evidenced by disclosures from Australian parent institutions and the interest rate risk component in New Zealand subsidiary disclosures.

© Oliver Wyman 47 Comparing New Zealand Bank Capital Ratios to International Peers ADDITIONAL DETAIL ON 10 PEER COUNTRIES APPENDIX B B.1 AUSTRALIA Variations in Australian capital rules have been extensively studied and quantified (see section 1.4 “Prior studies”). Each of the four major Australian banks publishes internationally comparable capital ratios as part of their annual investor presentations. These internationally comparable ratios have been used in this Oliver Wyman report. The key areas of variation identified by Australia banks in their 2024 investor presentations are based on the ABA Basel 3.1 Capital Comparison Study performed by PwC. The key variations identified and quantified are:55 • Capital deductions for DTA, equity investments and capitalised expenses. • Interest rate risk in the banking book included in Pillar 1 capital requirements. • Supervisory slotting for some forms of specialised lending. • Scaling factor of 1.1 for IRB RWAs. • Residential mortgage multiplier of 1.4, 1.7 or 2.5, 5% risk weight floor and standardised treatment for non-standard mortgages. • Income-Producing Real Estate multiplier of 1.5 for IRB-approved exposures. • Requirement to use RBNZ’s RWA rules in many cases for credit exposures in New Zealand. • LGDs for non-retail exposures (some concessionary and others more conservative). • APRA imposes an output floor for internally modelled RWAs of 72.5% of standardised RWAs: internationally comparable capital ratios do not include the impact of this floor. From 1 January 2023, APRA introduced new capital rules aligned to the “Basel 3.1” reforms. Internationally comparable ratios published after this date compare to “Basel 3.1” rules, rather than the in-force Basel III standard used for comparison in this Oliver Wyman report. Adjusting ratios to be internationally comparable is an inherently complex process; we have judged that the internationally comparable capital ratios published by the banks themselves 55 See e.g. page 4 of the Basel 3.1 Capital Comparison Study https://www.ausbanking.org.au/wp-content/ uploads/2023/03/PwC-Basel-3.1-Capital-Comparison-Study-10-March-2023.pdf.

© Oliver Wyman 48 Comparing New Zealand Bank Capital Ratios to International Peers are nonetheless the best metric to use. Key reasons for this conclusions are that (1) the majority of above variations are also variations versus pre-Basel III standards, and (2) the level of increase to published internationally comparable ratios vs reported ratios did not change materially before or after the implementation of the 1 January 2023 reforms. Banks considered and relevant data sources are as follows: Pillar Data Sources CBA • Pillar 3 report as of June 2024 • Investor presentation as of June 2024, page 102 WBC • Pillar 3 report as of September 2024 • Investor presentation as of September 2024, page 75 NAB • Pillar 3 report as of September 2024 • Investor presentation as of September 2024, page 108 ANZ • Pillar 3 report as of September 2024 • Investor presentation as of September 2024, page 68 B.2 CANADA Canada implemented a national version of the Basel 3.1 reforms that have taken effect from April 2023. No material variations from Basel III standards were identified vs Canada’s regime before implementing these Basel 3.1 reforms. Canada’s regulator, OSFI, noted that “The overall impact of 2017 Basel III reforms for Canadian banks in totality is, per our calculations, broadly capital neutral,”56 and we observed that there were not material changes in reported capital ratios before vs after these reforms were implemented. Noting the inherent limitations in adjusting reported capital ratios to be internationally comparable, we have deemed it acceptable to use Canada’s reported capital ratios for international comparison without making adjustments. Banks considered and relevant data sources are as follows: Pillar Data Sources RBC • Pillar 3 report as of March 2025 TD Bank Scotiabank BMO CIBC 56 https://www.osfi-bsif.gc.ca/en/news/basel-iii-capital-floor-technical-note.

© Oliver Wyman 49 Comparing New Zealand Bank Capital Ratios to International Peers B.3 HONG KONG Hong Kong has implemented a local version of the Basel 3.1 reforms, that have taken effect from January 2025. We accordingly used capital ratios reported as of December 2024 (before these reforms had taken effect). Deviations identified vs Basel III internationals standards were full deduction of deferred tax assets and intangibles, and deduction of cumulative fair value gains arising from the revaluation of land and buildings. These deductions are directly visible in Pillar 3 reports and were added back in. A corresponding re-inclusion of cumulative fair value gains eligible for inclusion in Tier 2 capital was also reversed. Banks considered and relevant data sources are as follows: Pillar Data Sources BOC Hong Kong • Pillar 3 report as of December 2024 HSBC Ltd Standard Chartered Hong Kong Hangseng Bank B.4 SINGAPORE Singapore has implemented a local version of the Basel 3.1 reforms, that have taken effect from 1 July 2024. Accordingly, data was used as of June 2024, before the new regime had come into effect. When comparing Singapore’s June 2024 capital regime to the international pre-Basel 3.1 standard, one material variation from Basel III standards was identified: That Singapore requires mandatory use of supervisory slotting for certain specialised lending exposures under IRB, not own estimates, whereas Basel III permits use of own estimates of PD/LGD for qualifying banks. To model this, we mapped supervisory slots to PD grades with a consistent mapping to the equivalent adjustment for New Zealand. Risk weights were applied for each bank from the reported IRB approach (from Pillar 3 disclosures) for Corporates — General or Corporate — Other. Banks considered and relevant data sources are as follows: Pillar Data Sources DBS OCBC • Pillar 3 report as of June 2024 UOB

© Oliver Wyman 50 Comparing New Zealand Bank Capital Ratios to International Peers B.5 ISRAEL Israeli capital requirements are set by the Bank of Israel. Visibility on Israeli capital rules (and variations versus the Basel III international standard) is lower than for other countries in the peer sample. This report has taken a focused approach and:

1. Analysed Israel’s rules on capital definition, in particular, checking for comparable variations seen in other countries (including New Zealand). No material variations were identified.
2. Identified that Israel banks only use the standardised approach to calculate credit risk-weighted assets, and compared Israel’s risk weights to comparable international risk weights. Israel’s risk weights are more conservative than Basel III risk weights for residential mortgages. Israel banks’ credit RWAs were recalculated using Basel III standardised making weights, making assumptions on distribution across LVR bands. Identification of variations should be understood with the above limitations in mind. Banks considered and relevant data sources are as follows: Bank Data Sources Bank Hapoalim • Pillar 3 report as of March 2025 Bank Leumi • Pillar 3 report as of December 2024 Mizrahi Tefahot Bank • Pillar 3 report as of March 2025

© Oliver Wyman 51 Comparing New Zealand Bank Capital Ratios to International Peers B.6 EUROPEAN COUNTRIES AND THE UNITED KINGDOM The European regulatory landscape is overseen by multiple legislative instruments and regulators: • European capital requirements are primarily set through the Capital Requirements Directive (CRD) and the Capital Requirements Regulation (CRR), which implement the Basel framework within the European Union. • The European Banking Authority (EBA) is the common regulator responsible for further technical standards and guidelines as well as promoting convergence of supervisory practices to ensure a common application of the prudential rules across the EU; it may also provide guidelines to countries in the European Economic Area in some instances. • The European Central Bank acts as the supervisor for the largest banks within EU countries adopting the euro (or non-euro countries through “close cooperation agreements”), and can also impose additional capital requirements through the Supervisory Review and Evaluation Process (SREP; via a Pillar 2 adjustment). Belgium, Ireland and Sweden are EU countries (regulated by EBA), with Belgium and Ireland being within the Banking Union/with direct supervision by the ECB for the largest banks. Norway is not in the EU but is in the European Economic Area. Despite these differences and whilst there is some room for national discretion, in practice capital rules and their application remain very similar in Europe, and so these four countries are considered together in one section of this appendix. The European Banking Authority (EBA) published a 2023 Basel III Monitoring Exercise with an Annex Analysis of EU-specific Adjustments.57 Although this report focused on the new planned Basel 3.1 reforms, it identified two material variations in Europe’s current implementation of Basel III capital rules: • A supporting factor for SME and Infrastructure exposures (reducing exposures by 23.81% and 25% respectively). • An exemption from CVA capital charges for certain counterparties (e.g. pension funds). This is of less relevance to retail and commercial banks comparable to New Zealand major banks. Both of these adjustments imply that, under current EU implementation of Basel III rules (before Basel 3.1 implementation), adjusted capital ratios will be slightly lower than reported capital ratios. 57 https://www.eba.europa.eu/sites/default/files/document_library/Publications/Reports/2023/Basel%20III%20 monitoring%20report/1062188/Annex%20to%20Basel%20III%20monitoring%20report%20as%20of%20 December%202022%20-%20EU-specific%20Analysis.pdf.

© Oliver Wyman 52 Comparing New Zealand Bank Capital Ratios to International Peers We have modelled the SME and Infrastructure supporting factors for each European country and the United Kingdom. We have not modelled the CVA exemption, because it is not material to retail and commercial banks. We have also adjusted for the following variations, which were identified as potentially materially affecting adjusted capital ratios: • The EU and UK deduct foreseeable dividends from CET1 capital (in Basel these can be included). • For the UK, rules prescribe mandatory use of slotting for Income-Producing Real Estate. The limitations of this approach to identify variations should be noted; we have focused on the most material variations vs the Basel III standard. Future changes to European countries and UK are noted but not modelled. In particular, the EU has implemented Basel 3.1 reforms that have taken effect from 1 January 202558, with Norway adopting equivalent rules at the same time. Meanwhile, the UK has delayed its implementation date of the Basel 3.1 reforms to January 1, 2027.59 Banks considered and relevant data sources are as follows: Country Bank Data Sources Belgium KBC Group • Pillar 3 report as of December 2024 • Annual report as of December 2024 Belfius Bank • Pillar 3 report as of December 2024 • Annual report as of December 2024 • Investor presentation as of December 2024 ING Belgium • Pillar 3 report as of December 2024 • Annual report as of December 2024 Ireland Bank of Ireland • Pillar 3 report as of December 2024 • Annual report as of December 2024 • Investor presentation as of December 2024 Allied Irish Bank • Pillar 3 report as of December 2024 • Annual report as of December 2024 Norway DNB Group • Pillar 3 report as of December 2024 • Annual report as of December 2024 58 Source: Regulation (EU) 2024/162. 59 Source: BCBS RCAP “Adoption of key Basel III standards as of 15/05/2025”, https://www.bis.org/bcbs/implementation/ rcap_reports.htm.

© Oliver Wyman 53 Comparing New Zealand Bank Capital Ratios to International Peers Country Bank Data Sources Sweden SEB • Pillar 3 report as of December 2024 • Annual report as of December 2024 Svenska Handelsbanken Swedbank Nordea United Kingdom Note that, for the UK, we have considered the ring-fenced retail banks as comparable to New Zealand banks. These banks have different capital requirements vs parent companies. We used reported TLAC of the Group entities. HSBC UK Bank • Pillar 3 report as of December 2024 • Annual report as of December 2024 Barclays Bank UK Lloyds Bank plc Standard Chartered Bank

Oliver Wyman, a business of Marsh McLennan (NYSE: MMC), is a management consulting firm combining deep industry knowledge with specialised expertise to help clients optimise their business, improve operations and accelerate performance. Marsh McLennan is a global leader in risk, strategy and people, advising clients in 130 countries across four businesses: Marsh, Guy Carpenter, Mercer and Oliver Wyman. With annual revenue of $23 billion and more than 85,000 colleagues, Marsh McLennan helps build the confidence to thrive through the power of perspective. For more information, visit oliverwyman.com, or follow on LinkedIn and X. Copyright ©2025 Oliver Wyman All rights reserved. This report may not be reproduced or redistributed, in whole or in part, without the written permission of Oliver Wyman and Oliver Wyman accepts no liability whatsoever for the actions of third parties in this respect. The information and opinions in this report were prepared by Oliver Wyman. This report is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accountants, tax, legal or financial advisors. Oliver Wyman has made every effort to use reliable, up-to-date and comprehensive information and analysis, but all information is provided without warranty of any kind, express or implied. Oliver Wyman disclaims any responsibility to update the information or conclusions in this report. Oliver Wyman accepts no liability for any loss arising from any action taken or refrained from as a result of information contained in this report or any reports or sources of information referred to herein, or for any consequential, special or similar damages even if advised of the possibility of such damages. The report is not an offer to buy or sell securities or a solicitation of an offer to buy or sell securities. This report may not be sold without the written consent of Oliver Wyman. Oliver Wyman – A business of Marsh McLennan www.oliverwyman.com