RBNZ pulls last liquidity facility as bank funding normalises

Tuesday 9th November 2010

The Reserve Bank of New Zealand is doing away with the last remaining temporary liquidity facility put in place during the financial crisis, now that banks are able to access funding through traditional sources.

The central bank began in October last year to withdraw several temporary crisis measures put in place in 2008 to help ensure day to day liquidity.

The last remaining liquidity measure, the regular Tuesday Open Market Operation, was put in place to allow banks to borrow funds on a three-monthly basis to continue operating after liquidity in global markets evaporated in the wake of the financial crisis.

“Use of the RBNZ’s special facilities, specifically for the purpose of accessing term funding, has been low with New Zealand banks able to access funding from their normal market sources,” said RBNZ deputy governor Grant Spencer. “As a result, the RBNZ is removing the regular Tuesday Open Market Operation which is the last remaining temporary liquidity facility introduced during the financial crisis.”

The RBNZ said it will still retain the ability to offer term maturity dates at its discretion in its normal OMO’s.

The change will be effective as of December 1, with the final regular Tuesday OMO scheduled for November 30.

The bank said it will continue to review remaining measures initiated during the crisis, particularly the range and credit quality of securities that are repo eligible in RBNZ operations.

“These decisions have no implications for the stance of monetary policy,” Spencer said.

Businesswire.co.nz

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