The Reserve Bank has defended the decision not to include wholesale deposits in the deposit guarantee scheme announced with some urgency on Sunday afternoon. Some banks have raised concerns that the Australian government guarantee scheme also provides a guarantee for wholesale bank lending in inter-bank markets. Reserve Bank spokesman Mike Hannah told interest.co.nz the scheme has been designed for New Zealand circumstances and to minimise risks to New Zealand taxpayers. "It makes no sense for us to simply copy the Australian arrangements when our own situation is very different," Hannah said. "Part of the purpose of the Australian scheme appears to be to shore up confidence of the wholesale markets," he said. "We do not believe that is necessary in this country at this time. The banks do not have immediate and urgent funding needs; and the steps the NZ government has taken to support retail depositors' confidence should ensure a stable retail funding base." Hannah said the system in Australia was relatively self-contained in the sense that the main banks were all Australian. "Thus a taxpayer-supported government guarantee ultimately benefits the citizens of that country," Hannah said. "Given the ownership of much of the banking system in NZ, the government is mindful that the foreign shareholders may in fact be the ultimate beneficiaries of any government support for the banks. It is a much broader guarantee than any other made by any other government in recent weeks."
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.