RBNZ confident in financial system, helps lift liquidity

Friday 19th September 2008

The Reserve Bank of New Zealand said it has confidence in the nation's financial system in the wake of global market turmoil, though it will take steps to help lift liquidity among banks.

"Financial prices have become volatile and, with heightened uncertainty, investors are becoming more risk averse," Governor Alan Bollard said. New Zealand banks aren't directly involved though there are "indirect adverse effects on liquidity," he said.

The Reserve Bank will begin accepting bank paper in its daily market operations and offer longer terms of up to six months to ease pressure at the short end of the market. It will also start a new facility that will accept certain asset-backed securities as collateral.

Global losses and writedowns among financial companies during the rout have mounted to some US$518 billion, according to a Bloomberg estimate. The turmoil has also led to the failure of Lehman Brothers, the takeover of Merrill Lynch in a rescue and the sale of HBOS in the UK.

By Jonathan Underhill

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