RBNZ will decide results of TD war

While the Reserve Bank finalised its liquidity policy for banks in June, it has yet to complete the reporting requirements lenders will have to adhere to, nor has it announced the regime for non-bank deposit takers. Until this is known, banks will continue to pitch for short-term customer deposits, according to ANZ National Bank's Jenny Fagg, even as the cost of wholesale funds comes down.

"If you look at it in isolation, you'd have the customer funded deposit rates somewhere around where your lending rate is, if you ignore liquidity requirements, they should just equalise," Fagg told Good Returns. "It's the unknown liquidity requirements" that's helping prop it up, she said.

Under the Reserve Bank's liquidity policy, banks will be required to keep "robust" liquidity positions over both the short- and long-terms, as well as keeping the regulator abreast of risks to its business.

Banking regulators in Australia and New Zealand had handled the credit crunch and financial crisis well, Fagg told a trans-Tasman credit conference in Wellington. Still, there is a risk that they will go overboard in regulating the industry, despite the Big Four Australian banks proving themselves to be well-placed in the global economy.