S&P says the New Zealand banking sector would need to raise an extra $13.7 billion as a result with the big four banks raising $6.6 billion.
In addition to that it says the big four banks and Kiwibank would need to replace $6.3b of capital that will be non-qualifying under the new rules.
But it says the big four Australian parent banks may also need to inject A$8.1 billion in new capital.
"We analyse the financial risks the Australian major banks face on a consolidated basis (resulting in the elimination of intragroup transactions).
"That said, from a capital allocation and capital management point of view, higher capital requirements in New Zealand would have consequences for the Australian major banks."
"We estimate that if the four major Australian banks wanted to maintain their overall level 1 Tier 1 capital ratios at about their current levels, they would have to inject A$8.1 billion."
It estimates that ANZ would need to raise the most at A$2.45b, followed by National Australia Bank - parent of the Bank of New Zealand - which would need A$2.37b.
ASB parent Commonwealth Bank of Australia would need A$1.9b and Westpac $1.37b.
It says the proposal are unlikely to have a big impact on bigger local banks like Rabobank and Kiwibank with Rabobank's parent expected to pick up any shortfall.
It estimates Kiwibank would only need to raise $20 million to meet the minimum requirements under the proposals.
While the smaller banks and non-banks financial institutions would benefit from the proposals.
"The capital impost for smaller banks (that operate on the standardised approach) will be less than that on the New Zealand major banks.
"Non-banks also stand to benefit as the proposal does not suggest increased regulatory capital requirements for them."
However they say given the strong market position of the major banks the change is unlikely to see their competitive advantage disappear any time soon.
The warning comes a day ahead of a major speech by deputy Reserve Bank governor Geoff Bascand.
Bascand will speak about "Safer banks for greater wellbeing" at Victoria University in Wellington at 12.30pm Tuesday.
On Friday Bascand told journalists that its proposed new capital requirements would promote a level playing field among the big lenders.
He said the proposals were about "putting the roof on while the sun is shining" — or bolstering the banks' capital adequacy before a crisis appears.
"Part of what's in these proposals involves quite a bit of levelling the playing field," he said.
"It is removing what we think is an artificial advantage that the big four banks have over the rest of the banking sector."
The capital proposals are open to submissions until May 3.
