The Reserve Bank has announced further measures to ease stress in New Zealand's credit markets, including a plan to lend to banks on collateral that includes investment grade commercial paper from large corporates.
Deputy Governor Grant Spencer said the measures are similar to actions taken by other central banks in the wake of the global financial market turmoil.
"Following a number of similar measures adopted earlier in the year, we are taking these steps to further enhance system liquidity and ease some of the current pressures on corporate sector funding," Spencer said.
The new measures, most of which will take effect from 17 December, include the following:
* Extension of the range of securities eligible for acceptance in the Reserve Bank's domestic liquidity operations to include:
- Securities guaranteed by the New Zealand government;
- Highly rated NZ corporate securities, denominated in NZD, with a long term credit rating of BBB- or better;
- Highly rated NZ corporate securities, denominated in NZD, with a short term credit rating of A2, F2, P2 or better; and
- NZD Asset Backed Securities rated AAA, A1+, F1+ or P1.
* The current graduated 'haircut' regime will apply for all securities eligible for domestic liquidity operations.
* All issues will be approved on a case-by-case basis.
Spencer said these liquidity measures did not mean the Reserve Bank would be lending direct to the corporate sector.
"However, corporate debt will become more liquid and therefore a more attractive investment prospect for banks and portfolio managers," Spencer said, adding the measures had no implications for monetary policy.
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