KEY POINTS:
New Zealand banks about to foray back into world markets to raise money they need to continue lending here should be able to source the funds they need, says the Reserve Bank (RBNZ).
About 40 per cent of the money loaned by New Zealand banks comes from offshore,
but the international credit crunch has left international markets dormant.
RBNZ governor Alan Bollard said today all the banks looked fine, though they were operating in very hard trading conditions.
"They are looking conservatively at new lending," he said.
There was a mixture of demand drying up for loans in New Zealand, and the supply of money for lending drying up.
The RBNZ had been telling banks they should be going out and raising funds, and conservatively lending to the household and business sectors.
"We're generally getting positive responses back, except that there's always a `yes, but we're very concerned about international conditions'," he said.
Banks had access to the RBNZ's residual mortgage-backed security facility to underpin their liquidity, but there was a shortage of appetite for any risk.
"New Zealanders have basically got their eyes on the ball," he said.
"They haven't completely put away their wallets and purses, but they are doing precautionary things, like saving more and in some cases repaying mortgage debt."
So far, the nation had not seen too many people stressed by the declining labour market - though some people were starting to think about that.
The New Zealand banks did not have any "drop dead" dates by which time they had to source new funds - there was a complex mixture of different funds and maturities, and the RBNZ could help with short-term liquidity, as a stop-gap.
"Most of them have exercised some of that, but only a very limited amount. It could go a lot further if necessary."
Bollard and his successor as Treasury Secretary, John Whitehead, and several other Treasury executives this month mounted a "roadshow" round major financial capitals such as London, New York and Hong Kong to make a case for New Zealand being a good borrower, and potentially in better shape than many developed nations in the northern hemisphere.
They sought to reassure potential lenders overseas about issues such as the Government's deposit guarantees for banks.
Though Whitehead has said they found that "the worst is not over" in the weakening world outlook, the pair pitched the potential for New Zealand's monetary and fiscal policy to stimulate the economy.
And they explained the deposit guarantees overseas to prepare the ground for the nation's bankers, who rely on overseas lenders for more than a third of the funds they lend in this country, as well as for the Government's own looming search for funds to fund budget deficits.
Bollard said funds overseas had wanted to know the fine details of the Government guarantees.
- NZPA
