The Reserve Bank said today it would boost liquidity in local money markets by accepting bank bills as collateral.
It said starting from tomorrow it would accept New Zealand bank bills in its overnight reverse repurchase facility (ORRF), at a cost of the official cash rate, currently 8.25per cent, plus a margin of 100 basis points (1 percentage point).
"Pressures have persisted over the past week warranting steps to ease liquidity conditions in the interbank market," Reserve Bank Deputy Governor Grant Spencer said in a statement.
The RBNZ operates the ORRF as a last resort facility, lending cash overnight and holding government bonds or bills as security.
He said at the same time the RBNZ would introduce the previously announced exchange settlement account tiering regime, which had been due to be introduced from September 3.
"This measure is aimed solely at easing short-term interbank liquidity pressures and has no implications for the Bank's monetary policy stance," Mr Spencer said.
It has not pumped extra cash into the financial system during the current market squeeze as some other central banks have, but in response to demand for government securities has increased the amount of Treasury bills and short-term government bonds.
The bank said earlier it was also increasing the regular monthly bond tender by $100 million as a special step to help ease any credit crunch.
