Reserve Bank announces further liquidity measure
"At the moment the New Zealand financial system is working satisfactorily. It has held up relatively well in the face of the volatility and disruptions that we are seeing internationally," he said.
"New Zealand banks have high-quality assets. Fortunately they do not have the poor quality assets that have proved so damaging overseas."
Dr Bollard said that over the past year the Bank has announced a number of measures that will make it easier for financial market participants to maintain liquidity during a period of financial market disruption.
"To further improve liquidity prospects for the banking system, we are announcing that the Reserve Bank will temporarily broaden its security programme. We will, if required, be prepared to lend on the basis of fully-secured Residential Mortgage-Backed Securities (RMBSs), prior to those securities achieving formal ratings."
He said there has been good progress by institutions in developing RMBSs should they be needed.
"While we believe these measures are sufficient at this stage, the Bank retains a number of other regulatory powers. We are committed to ensuring the ongoing health of the financial system and remain ready to respond as appropriate.
"The centre of the financial crisis is in the United States and Europe and, while there will be ramifications for our economy, the next review of monetary policy is scheduled on 23 October.
"In the meantime we are staying in very close touch with the banks, and also with the Government."
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