New Zealand moves to increase banking liquidity

WELLINGTON: New Zealand's central bank moved to increase liquidity in the financial system on Thursday but said local banks had held up "relatively well" despite the global turmoil.

Reserve Bank of New Zealand Governor Alan Bollard said the bank would broaden its security programme to lend to banks against fully-secured mortgage-backed securities before they are formally rated.

"While we believe these measures are sufficient at this stage, the bank retains a number of other regulatory powers," Bollard said.

"We are committed to ensuring the ongoing health of the financial system and remain ready to respond as appropriate."
Bollard's announcement came shortly after the US Federal Reserve and five other major central banks acted in concert to cut interest rates as fears intensified over the global financial crisis.

This week the Australian central bank cut the official interest rate by a full percentage point, but Bollard simply noted the next New Zealand review of rates was due on October 23.

"In the meantime we are staying in very close touch with the banks, and also with the government," he said.

"At the moment the New Zealand financial system is working satisfactorily. It has held up relatively well in the face of the volatility and disruptions that we are seeing internationally."

He said New Zealand banks did not hold the poor quality assets that have caused so much damage to banks in the United States and Europe.