Prudential Liquidity policy FAQs
New Zealand banks have in recent years had an unusually high proportion of their international debt securities maturing within one year, by comparison with other developed countries. We have set the 75% minimum CFR as a challenging but achievable target for our banks, to ensure a higher proportion of stable funding, and a reduced reliance on short-term offshore funding.
The Basel Committee on Banking Supervision published a revised version of its “Principles for Sound Liquidity Risk Management and Supervision” in September 2008, and the Reserve Bank’s liquidity policy is closely aligned with those principles. Those principles do not however specify particular quantitative ratio measures or requirements. The Basel Committee is carrying on further work on liquidity supervision, which we understand is investigating the possibility of introducing such measures at the international level.
The Reserve Bank is not involved in the work of the Basel Committee, which is not expected to produce anything for public consultation for some months. We will review whatever the Basel Committee comes out with, but from the direction their work appears to be going in, we do not expect to make any changes to our policy following the release of the Basel Committee’s new policy.