(Adds details on RBNZ proposal, context) Dec 17 (Reuters) -...

(Adds details on RBNZ proposal, context)

Dec 17 (Reuters) - National Australia Bank Ltd (NAB) (NAB) on Monday flagged a potential Tier 1 capital increase of about NZ$4 billion to NZ$5 billion ($2.7 billion to $3.4 billion) for subsidiary Bank of New Zealand , after New Zealand's central bank proposed to almost double capital requirements for banks.

The Reserve Bank of New Zealand (RBNZ) said on Friday it was considering almost doubling the required capital banks would need to hold to bolster the financial system's capacity to handle any shocks.

The RBNZ posited that the New Zealand units of Australia's four major banks would have to add a total of about NZ$12.8 billion in Tier 1 capital to meet its requirements. The central bank proposed a five-year transition period.

Australia and New Zealand Banking Group (ANZ) has already flagged a capital increase of NZ$6-8 billion following the RBNZ's proposal. Peers Commonwealth Bank of Australia (CBA) and Westpac (WBC) have acknowledged the proposal, but have not provided any concrete figures.

The Australian Prudential Regulation Authority (APRA) had earlier this year also flagged higher capital requirements for the country's major banks in order to bring them more in line with international standards.

NAB, Australia's fourth-largest lender, said it and its unit would collectively engage with the RBNZ and the APRA regarding the changes.

Separately, NAB said its CEO would take about two months leave around the scheduled release of a major report into the Australia's finance sector, prompting a rebuke from a shareholder group. ($1 = 1.4721 New Zealand dollars)

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NZ central bank proposes almost doubling bank capital 

requirements, kiwi dlr falls

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