On Tuesday the Westpac Banking Corp (ASX: WBC) share price fell a further 1.5% to hit a new 52-week low of $24.22.
This decline meant that the shares of Australia's oldest bank had fallen a massive 22% in 2018.
Why is the Westpac share price down 22% this year?
As with fellow beaten down banks Australia and New Zealand Banking Group (ASX: ANZ) and Commonwealth Bank of Australia (ASX: CBA), Westpac's shares have come under pressure this year for a number of reasons.
The main ones are of course the budget levy, the Royal Commission, and the housing market downturn.
In addition to this, developments across the Tasman sea have hit Australia's big four banks hard this month.
News that the Reserve Bank of New Zealand (RBNZ) is looking into increasing its current tier 1 minimum capital ratio from 8.5% to 16% has kicked the banks whilst they are down.
The New Zealand central bank believes that the proposed changes will further strengthen its banking system and protect the economy and depositors from bank failure.
Unfortunately for shareholders, this is likely to come at a significant cost for the banks.
A note out of Macquarie, courtesy of the AFR, suggests that the major banks may have to deploy an "additional $3.5 billion to $5.8 billion into their NZ operations over the next five years."
As Australian regulators are unlikely to be happy to have this amount of money leave the system, Macquarie suspects that the banks may have to raise capital if the RBNZ goes ahead with these changes.
Should you buy Westpac shares?
While I think the selloff of bank shares has been overdone and has left them trading at bargain levels, I think It may take some time for them to rerate higher.
If you're willing to be patient then I would buy them today, but if not, then I would suggest you consider other options.
