A restriction that stopped banks from paying out a full dividend to their shareholders will be lifted from July.

The Reserve Bank of New Zealand stopped the banks from paying out any dividends in March 2020 at the start of the global pandemic.

They were then eased in July last year to allow banks to pay out up to 50 per cent of their surplus in dividends.

Christian Hawkesby, RBNZ deputy governor, said the restrictions had supported financial stability during the height of the pandemic.

"With the restrictions coming to an end, we are communicating with the country's registered trading banks about our ongoing expectation that banks put the need to support households and businesses at the centre of their assessment of the appropriate level of dividends, and continue to be prudent in determining the appropriate size of dividends paid to their shareholders."

Hawkesby said while underlying strength remained in the economy it was still facing headwinds.

"Underlying strength remains in the economy, supported by a strong labour market, sound household balance sheets, continued fiscal support, and a strong terms of trade.

"However, the economy is still facing headwinds, including heightened global economic uncertainty, cost pressures, and low consumer confidence."

He said banks should ensure that they were well placed to manage the impacts of weaker activity on their balance sheets and to assist customers.

Before Covid-19 hit in the 2019 financial year, ANZ NZ, ASB, BNZ, and Westpac NZ collectively paid more than $5.2 billion in ordinary dividends to their Australian parents.

The end of the restriction also coincides with the beginning of higher capital requirements for banks.

Hawkesby said banks' dividend decisions should take into account the higher capital requirements.

Bank profits have soared in the last year with banks benefiting from the rising housing market and a big write-back in impairment provisions that were put in place during 2020 and ended up not being needed.

Last month ANZ NZ reported a first half profit of $1.096 billion - an 18 per cent rise on the same prior period.

Its disclosure statements show it paid out $904 million in the six months to March 31 to its Australian parent ASX-listed ANZ.

BNZ's half year profit rose 7 per cent to $709 million. It paid out $325m to National Australia Bank.

Westpac New Zealand's net profit fell 5 per cent to $497m. It paid out a dividend of $465m to its immediate parent company Westpac New Zealand Group in February.