The New Zealand Government is considering whether to support the capital needs of Kiwibank, a business it owns through New Zealand Post.
Budget documents released yesterday, by the NZ Government, show "Kiwibank has indicated that it may require new equity within the next three years mainly to meet the Basel III regulatory capital requirements."
Interest.co.nz reported on the documents.
"New Zealand Post is reaching constraints in its balance sheet to support Kiwibank," Treasury said.
John Key, the finance minister, said, in a media briefing, that "we wouldn't want to prejudice ongoing discussions."
He said the issues facing Kiwibank and New Zealand Post were "challenging. Post is a declining business and Post is the business that underpins Kiwibank.
"Kiwibank has to adjust to a world where mortgage growth was pretty much zero. The bank grew through a time when mortgage growth was quite rapid.
"We'll make a decision some time this year, I suppose."
NZ Post contributed NZ$50 million in capital to Kiwibank in the second half of 2011, to take share capital to $360 million. With retained reserves and hybrid capital provided by private investors, the bank had $699 million of capital resources at the end of December 2011.
NZ Post has used Kiwibank to provide an alternative use of its network of more than 800 outlets, and as a source of revenue in an era when the traditional letter is in decline.