By Gareth Vaughan
The International Monetary Fund (IMF) says the Reserve Bank's Core Funding Ratio (CFR) has achieved its aim of reducing New Zealand's major banks' reliance on short-term funding, and might have even impacted credit growth.
In a report entitled Key Aspects of Macroprudential Policy the IMF notes efforts made by New Zealand and South Korea with macro-prudential liquidity tools.
From April 2010 the Reserve Bank introduced the CFR in a move designed to reduce New Zealand banks' reliance on short-term overseas borrowing. The CFR currently sets out that banks must secure funding for at least 75% of their lending from equity, retail deposits, and wholesale sources such as bonds (including covered bonds) with durations of at least a year.
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