Reserve Bank acts on market turbulence

The Reserve Bank is adopting measures to ensure there is sufficient liquidity in the banking system in case there is further turbulence on international markets.

It is considering a need for banks to diversify their funding sources and lengthen the maturity structure of their debts.

Measures will involve expanding the range of acceptable securities for the domestic market, including residential mortgage-backed securities.

The measures are outlined in the just-released half-yearly Financial Stability Report of the Reserve Bank and take effect from June 3.

Deputy Governor Grant Spencer said the Reserve Bank is confident the banking system can cope with the current conditions but is taking steps to ensure it can handle any unforeseen pressure in the current uncertain environment.

He said the measures mirror similar actions by other central banks in the wake of the global financial market turmoil.

- NEWSTALK ZB