Prudential Liquidity policy for banks released
The Reserve Bank today announced the release of its prudential liquidity policy for banks.
Acting Governor Grant Spencer said the policy sets various balance sheet requirements and disclosure obligations for banks around their internal liquidity management.
"The purpose of the policy is to ensure that banks maintain strong liquidity positions, making them more resilient to both short term and long- lasting funding shocks," Mr Spencer said.
"The vulnerability of the banks to liquidity shocks has been our main concern for the stability of the New Zealand financial system during the international financial crisis.
"While the funding markets have shown encouraging signs of improvement in recent months, we want to ensure that the New Zealand banking system is better protected against any future shocks of this sort."
The Bank began liquidity policy discussions with banks in early 2008, and issued a consultation paper in October 2008. "We received a large number of helpful submissions and have amended the policy in a number of important respects as a result. In particular, we have made substantial changes to some of the key definitions within the original draft policy, to ensure workability and ease of implementation for the banks."
Mr Spencer noted that, in light of the current pressures faced by banks, the new prudential liquidity requirements will be phased in over a two-year period.
"Some banks will be little affected as they are already close to the new policy requirements. Others will need to continue lengthening the maturity of their funding in a gradual and measured way," he said.
For more information on the new policy please see the prudential liquidity policy Q & A.
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