RBNZ adjusts haircuts on securities for domestic market operations

Release date
03 September 2014

The Reserve Bank announced today that it will be making changes to the haircut regime applied to repo eligible securities accepted in its domestic market operations, with effect from 10 November 2014.

Deputy Governor and Head of Financial Stability, Grant Spencer said: "The Reserve Bank expanded the range of securities it would accept in its domestic market operations during 2007 and 2008, and largely accepts the same securities as eligible for its prudential liquidity policy (BS13). The Reserve Bank applied haircuts to these securities at the time, based on the credit strength and liquidity of the underlying security.

"The Bank recently completed an internal review of both the securities accepted and the haircuts applied to those securities. Following this review, the Bank will retain the broad list of securities currently eligible for its domestic market operations. However, adjustments will be made to the current haircut regime based on credit and liquidity characteristics (such as ratings and trading volumes) and the treatment given by other central banks."

Haircuts on Mortgage Backed Securities and Asset Backed Securities were not considered under this review and as a result have not been adjusted. The Reserve Bank intends to review eligibility criteria, reporting requirements and haircuts on these securities in 2015.

The Bank will be consulting with registered banks shortly on whether to align the Bank's prudential liquidity policy under BS13 with the changes.

Details of the new haircut regime can be found on the Reserve Bank website

For any questions regarding operational matters please contact:

Domestic Operations - Te Okeroa, Manager Market Operations te.okeroa@rbnz.govt.nz

Prudential Liquidity Policy (BS13) - Kevin Hoskin, Adviser, Financial Policy

Ph 04 471 3764, kevin.hoskin@rbnz.govt.nz

Media Contact:
Naomi Mitchell, External Communications Adviser
Ph 04 471 3960, mob 027 485 9474, naomi.mitchell@rbnz.govt.nz

Further information:

Specific changes to the haircut regime include:

  • Term to maturity buckets incorporated in the haircut structure will be extended from two maturity buckets (< 3 years and ≥ 3 years) to three (0 - 1 year, 1 - 5 years and >5 years);
  • Haircuts on some securities have been adjusted;
  • The RBNZ will no longer apply haircuts for New Zealand Government securities on overnight and tomorrow/next day transactions in the Reserve Bank's Open Market Operations, or dealt directly in the General Collateral market. Haircuts will still be applied to short term transactions related to the Bank's standing facilities (e.g. the Overnight Reverse Repo Facility and Bond Lending Facilities).