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Reserve Bank confident in NZ financial system

Wednesday 1st October 2008

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The New Zealand banking system remains sound, the Reserve Bank last night reiterated. Comments follow financial market turbulence following the failure of the US troubled assets relief
program to pass through Congress.

Reserve Bank Governor Alan Bollard said the liquidity measures taken to date by the Bank are handling the pressures from global markets.

"We are monitoring current events in the financial markets very
closely," Bollard said. "The failure of the US Congress to agree the bail-out package was a disappointment, and it leaves parts of the financial markets in limbo until the matter is resolved.

"In the meantime, the very short-term effects on the New Zealand market are not major. However, there could well be medium-term effects on the economy - but we will continue to deal with them through our normal monetary policy process. The next OCR decision is due on October 23.

"The banking system is sound in New Zealand, and we do not expect this to alter. Over the past year, we have announced a number of measures that will make it easier for financial market participants to maintain liquidity during a period of financial market disruption. While we believe these are sufficient, we are keeping liquidity support arrangements under review and will respond as appropriate.

"In the meantime we are staying in close touch with the banks, and also with the Government."

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