New Zealand central bank boosts liquidity

by Richard Kilner

Story link: New Zealand central bank boosts liquidity

new measures designed to assist the country’s banking sector by improving liquidity.

The move has been made as a pre-emptive strike against potential future financial turbulence in the world’s credit markets and banking sectors.

The changes, which come into effect from 3 June, include increasing the range of securities acceptable to the Reserve Bank’s liquidity operations.

From 3 June, AA rated NZ government sector debt and NZ-registered NZ dollar AAA rated securities will be accepted.

The Overnight Reverse Repo Facility, currently standing at just 1 day, will be extended to a maximum timescale of 30 days.

In addition, the Facility will have a discount margin of 50 basis points for all applicable securities.

Grant Spencer, deputy governor, explained that the Reserve Bank’s actions were similar to the decisions made by other central banks across the world.

Spencer went on to say that he was confident that current market conditions posed no serious danger to the New Zealand banking sector, and that the changes were being made solely to see off any unforeseen future difficulties.