Banks in New Zealand will not be able to make dividend payments if their capital levels fall below the "conservation buffer" level that will be superimposed on the notional minimum capital requirements for banks.The Reserve Bank of New Zealand spelled out its planned approach to introducing the conservation buffer as part of the overhaul of regulatory requirements for banks known as Basel III.The RBNZ noted in its consultation paper on the topic that its policy of blocking "distributions" - which includes share buy-backs as well as dividends - is harsher than that in the policy proposed by the Basel Committee.Other aspects of the Reserve Bank's proposed conservation buffer requirements are largely in line with Basel III, the RBNZ said.The RBNZ also said that it will "develop a framework" for a counter-cyclical conservation buffer, one of the "macro-prudential" tools of banking regulation that has been part of the major shift in policy arising from the global financial crisis.The central bank said that "while the buffer is indicatively expected to vary between 0 and 2.5 per cent of risk-weighted assets, no formal limit will be set on the maximum size of the buffer."That is, the size of the buffer will be determined according to circumstances."The RBNZ said that the buffer "could potentially be extended to other lenders (such as non-bank deposit takers) in the future."