The Australian parents of New Zealand's four big banks stand to miss out on billions of dollars from their New Zealand arms after the Reserve Bank of New Zealand blocked dividend payments.
But there will also be pain for state-owned entities ACC and the NZ Superannuation Fund, a community trust and potentially bank customers of member-owned banks who could face no payouts this year.
Yesterday deputy Reserve Bank governor Geoff Bascand said it had agreed with the banks that during this period there would be "no payment of dividends on ordinary shares" and they should also not redeem non-common equity tier one capital instruments.
The restrictions came into place immediately under revised conditions of registration for all locally-incorporated banks.
Bascand said they would remain in place under further notice with the aim of relaxing them when the economic outlook had sufficiently recovered.
Analysis by KPMG shows just how big a hit this could be. Last year the big four NZ banks - ANZ, ASB, BNZ and Westpac - collectively paid over $5.2 billion in ordinary dividends to their Australian parents.
The biggest payment was by Westpac New Zealand which sent $2.965b across the ditch, followed by the BNZ which sent $1.145b to its parent National Australia Bank.
However, Westpac Australia immediately reinvested $2.2 billion of that amount as ordinary capital. The net dividend paid was therefore $765m.
ASB transferred $700 million to Commonwealth Bank of Australia while ANZ NZ sent the smallest amount at $400m.
Analysts have questioned whether the move will result in lower dividend payouts by the big four Australian banks.
The Australian regulator has not stopped banks from paying out dividends.
John Kensington, head of banking at KPMG, said he didn't think it would be a big blow to the Australian parents.
"There were already on notice that the capital regime was changing here."
New Zealand banks were supposed to be increasing capital levels from July but that has been pushed back a year because of the impact from Covid-19.
Kensington said the New Zealand arms only accounted for around 10 to 12 per cent of the profits of the Australian banks.
Smaller banks in New Zealand will also feel the flow-on effects.
Kiwibank will also be blocked from paying out dividends to its owners. Its holding company is 53 per cent owned by NZ Post, 25 per cent by the New Zealand Superannuation Fund and 22 per cent by ACC.
In its last financial year Kiwibank paid $25m in ordinary dividends.
Kensington said not getting a dividend would have an impact on Kiwibank's shareholders but given they were government organisations they would be doing their part.
"No one will like it but everyone will be doing their bit to help out," he said.
The change means TSB Bank will have to press pause on a $7.5 million payment to the TSB Community Trust which supports initiatives in the local community.
TSB Community Trust chief executive Maria Ramsay said the trust was in a strong position to continue significantly supporting the Taranaki community through the challenge of Covid-19.
"Over the years the trust has managed its finances closely and has reserves to ensure we can continue to operate and support our communities through this time.
"Our priority focus over the coming months is supporting the Taranaki community through Covid-19 and our granting decisions will reflect this," Ramsay said.
TSB chief executive Donna Cooper said the bank was in a strong financial position and would have been able to pay the dividend.
"But the Reserve Bank has rightly put in place additional measures to support the New Zealand economy at this time," Cooper said.
Others have yet to decide what they will do about the change.
The Co-operative Bank is owned by its customers and pays out an annual distribution to them.
David Cunningham, chief executive of The Co-operative Bank said: "We are considering what impact the recent changes from the Reserve Bank will have on us, and expect to communicate the implications next week."