Understanding liquidity

A quick video explaining what a bank's liquidity and core funding is and what is required from banks in NZ.

Understanding Liquidity

Banks in NZ need to hold assets that they can quickly call on so that they can serve the day to day needs of their customers. This is what’s known as liquidity.

The Reserve Bank requires banks to proactively manage their liquidity risks and sets certain minimum requirements.

This includes minimum amounts of liquid assets, which are assets that can easily be converted into cash.

Another requirement on banks is that they must get a minimum amount of funding from stable sources, which is called core funding.

Core funding is funding from stable sources. For example, funding that will stay in place for at least a year.

The core funding ratio requires banks to get a certain percentage of funding from stable sources compared to the value of the loans they have made.

You can learn more about your bank’s Liquidity on the bank financial strength dashboard.

Go to the Bank Financial Strength Dashboard