The Reserve Bank of New Zealand is considering an increase in the minimum capital requirement for NZ banks, separately from any changes resulting from the new Basel II capital accord.Writing in the latest edition of the RBNZ Bulletin, Ken Matthews of the bank's financial stability department, says New Zealand has applied the international standard minimum capital ratio of eight per cent of risk weighted assets (with at least four per cent in tier one capital and the balance as tier two capital) since the late 1980s."Consideration will be given to the possible costs and benefits of increasing the minimum capital requirement to a higher level, to further bolster the strength of banks' balance sheets and the financial system as a whole," he says.In practice, the NZ banks have maintained capital ratios well in excess of the regulatory minima. Aggregate tier one capital in 2003 was 7.8 per cent and total capital 10.5 per cent, according to the RBNZ.The Australian Prudential Regulatory Authority has indicated it will require the big four Australian banks to apply the advanced capital allocation approaches under Basel II on a group-wide basis.Acknowledging the highly integrated and interdependent Australian and New Zealand banking markets - Australian-owned banks hold 87 percent of NZ's banking system assets - the RBNZ says it will "consider the merits of alternative approaches to implementing changes to the capital accord, taking into account trans-Tasman integration of banking regulation, among other factors."However, Matthews confirms the RBNZ's preference is for all NZ banks to calculate their regulatory capital using the Basel II standardized model rather than either of the advanced approaches.Last weekend, the Institute of International Finance, representing more than 330 financial institutions around the world, again stressed the importance of implementing Basel II consistently across major markets to realise the full benefits of a level playing field while minimizing the costs and complexity for internationally active banks.