The Reserve Bank has ordered TSB Bank to commission an independent report into how it calculates and reports its capital and liquidity ratios, five days before Heartland Group shareholders vote on buying the Taranaki bank for $620 million.
The Reserve Bank said on Friday it had used its power under Section 95 of the Banking (Prudential Supervision) Act 1989, which lets it require a bank to provide a report by an independent person the Reserve Bank approves. It said the notice was issued “after TSB identified and reported issues concerning aspects of the computation and reporting of its capital and liquidity ratios.”
TSB said the notice was issued on 18 September 2026 and requires the bank to give the Reserve Bank independent assurance about its compliance with prudential requirements on liquidity, capital adequacy and regulatory reporting. It has appointed Deloitte to do the work. A draft report is due at the end of October and the final report is due to the Reserve Bank in November.
“TSB’s current liquidity and funding positions are sound, and the bank remains well capitalised,” the bank said, adding that the review would provide “an additional level of independent assurance as TSB prepares for the proposed merger with Heartland Bank.”
The Reserve Bank would say nothing more. “As this is an ongoing prudential matter, the Reserve Bank is unable to provide any further comments,” it said. RNZ reported that Section 95 notices are relatively uncommon, with only a handful issued by the central bank in recent years.
The problems themselves are not new. They have been set out in TSB’s own disclosure statements, which interest.co.nz summarised on Friday. The bank’s latest general disclosure statement, for the year to 31 March 2026, says an internal review found an error in how it calculated its regulatory liquidity ratios. Some funding balances had been counted as non-market funding when they should have been counted as market funding. As a result TSB says it has been non-compliant with a condition of its banking registration since 2010, when the liquidity rules took effect, although it says its liquidity ratios stayed above the regulatory minimums throughout.
A second set of errors, found in 2019, affected the way TSB worked out its risk weighted assets and regulatory capital. “The Bank used loan-to-value ratios calculated at origination, as opposed to recalculating them for each reporting period,” TSB said in last year’s disclosure statement. In that 2025 statement it also said it held “approximately $192m of capital in excess of the minimum regulatory capital requirements including the prudential capital buffer.” This year’s statement says “Capital adequacy calculation issues were resolved as at 30 September 2025,” and that earlier figures were not restated because the effect of the errors was judged immaterial.
The timing matters because of the deal on the table. In June Heartland Group Holdings agreed to buy TSB from the Toi Foundation for $620 million and merge it with Heartland Bank to form TSB Heartland Bank. The Toi Foundation, the charitable trust that owns TSB, gave trustee approval in late August. That came after the High Court turned down a Taranaki community group’s bid for an interim injunction to stop the sale, with Justice Andru Isac describing its claims as “legally and factually weak.”
Heartland told the stock exchange in a statement dated 25 September that the review relates to TSB, and that it and the Toi Foundation “continue to actively engage with RBNZ” on the proposed takeover and merger.
“We take regulatory matters very seriously and will consider any relevant findings from the review, including any implications for the Proposed Transaction, as the review progresses,” Heartland chief executive Andrew Dixson said.
He said the case for the merger still stood. “The opportunity to create a New Zealand challenger bank of scale by combining Heartland Bank’s specialist expertise with TSB’s everyday banking capabilities remains compelling. The Proposed Transaction is still subject to several conditions which provides an important protection for Heartland shareholders.”
Those conditions include Heartland shareholder approval, a material adverse change condition covering TSB, and the regulatory approvals the deal still needs. Heartland spelled out what that means in plain terms. “This means that if the outcomes of the review are materially different to what is known today, the Proposed Transaction may not complete, even if Heartland shareholders have approved it.”
Heartland said it carried out extensive due diligence before signing the merger agreement, and that matters found in that process were reflected in the commercial and contractual terms. It also noted that the meeting documents sent to shareholders, published on 31 August, went out before TSB received the notice.
The special shareholder meeting will go ahead as planned on Wednesday 30 September, online and in person at Eden Park, and the Heartland board still unanimously supports every resolution. Shareholders who have already voted by post, online or by proxy can change their vote until 3pm on Monday 28 September. Those who vote against the deal have minority buy-out rights. Heartland said it would not speculate on the outcome of the review and would give updates as findings arrive, including on any effect on the target date for completing the merger.
For TSB customers there is no sign of any immediate change. The bank says its liquidity and funding positions are sound and it is well capitalised, and the Reserve Bank describes Section 95 reports as part of its supervisory toolkit, a way of getting independent assurance about a bank’s systems and practice. But the notice puts a formal question mark over TSB’s reporting systems at the very moment Heartland shareholders are being asked to commit, and the answer will not arrive until November, after the vote.
It is also the second regulatory matter for TSB in a week. On 22 September the Financial Markets Authority issued a warning after the bank overcharged 7,309 business accounts for six years, and TSB is repaying $1.73 million. That matter concerned fees charged to customers and is separate from the capital and liquidity reporting now under review.
Should Heartland shareholders wait for Deloitte’s report before voting, or is the deal still worth backing? Tell us what you think in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
Leave a Reply