At least one other Australian major bank is facing a capital hit from the Reserve Bank of New Zealand after NAB's Kiwi banking subsidiary was forced to stump up an extra NZ$250 million for regulatory breaches. The RBNZ yesterday announced that NAB's Bank of New Zealand arm would boost its regulatory capital to cover operational risk to NZ$600 million from NZ$350 million for misreporting its regulatory capital requirements. Throughout 2018 the BNZ disclosed a series of breaches to the Kiwi central bank that related to miscalculations of risk weighted assets for various categories of business loans. The combined effect of the miscalculations was to understate the level of risk weighted assets on the BNZ balance sheet and inflate the regulatory capital ratios of the bank that were reported in the 2016 and 2017 financial accounts. BNZ's tier one capital position in 2017 was inflated by 31 basis points as a result of the misreporting. The capital ratios were corrected in the 2018 accounts, with BNZ directors admitting that the misreporting breached the bank's conditions of registration. Since deciding to impose the additional capital overlay on the NAB subsidiary, the RBNZ has ordered the bank undertake a comprehensive review of its capital reporting. The regulator said it believed the review, which will be overseen by auditors from PWC, was likely to unearth more breaches. "Given the likelihood that further compliance issues will be discovered during the review and remediation, the Reserve Bank regards a precautionary capital adjustment as prudent," said RBNZ deputy governor, Geoff Bascand. While the breaches are the latest embarrassing contributions to NAB's scabrous risk management record, Bascand said that other Kiwi banks were now admitting to past miscalculations of their regulatory capital positions. Bascand did not name the banks making such admissions, but his commentary is likely to heighten concern among institutional investors that one or more of the other major Australian banks - CBA, Westpac and ANZ - could be facing higher capital overlays for misleading reporting. "Over the past year, a number of banks have disclosed breaches of their conditions of registration," Bascand said. "Many of these have related to errors in the calculation of their regulatory capital or liquidity which, in some cases, have gone undetected for a number of years." Bascand said he expected the PWC review to identify all outstanding compliance issues and potential breaches at BNZ. "We are reassured by BNZ's response to the issues along with the independent oversight from PWC," he said. "BNZ has committed to providing the Reserve Bank with regular and timely updates of the details of issues as they are discovered and the remedial activity as this work progresses. "The additional capital overlay will be removed when remediation is complete." The heightened scrutiny of banking activity in New Zealand could force several Aussie banks to review their ownership of Kiwi subsidiaries given that capital requirements  will become