The Reserve Bank has added another arrow to its quiver of liquidity measures intended to ensure the New Zealand financial system rides out current market difficulties without running short of ready cash.
The RBNZ yesterday said it would hold regular market operations (OMO) each Tuesday morning, giving banks
the opportunity to raise funds using only highly rated corporate and asset-backed securities as collateral.
The move is in addition to the weekly Wednesday morning term auction facility (TAF) which was launched in November, by which banks can use a variety of highly rated securities as collateral on funding from the central bank.
The moves are in response to difficult conditions in overseas credit and local interbank markets.
Since the TAF was launched, banks have raised $5.7 billion in funding via the facility, according to Reserve Bank data.
Highly rated corporate bonds, which were previously accepted by the RBNZ in its TAF facility, will now be accepted just via the Tuesday morning OMO.
The new operation begins next week. The change is temporary and will persist while markets remain unsettled.
