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The Reserve Bank of New Zealand has broadened the range of securities it will accept from banks as collateral on loans extended to them as part of its domestic liquidity operations.
Among this expanded range of securities, it will now accept paper issued by finance companies covered by Government guarantees as well as highly rated corporate paper.
Deputy Governor Grant Spencer said the measures were similar to action taken by other central banks in the wake of the global financial market turmoil.
"Following a number of similar measures adopted earlier in the year, we are taking these steps to further enhance system liquidity and ease some of the current pressures on corporate sector funding," Spencer said.
The additional securities the RBNZ will accept are:
* Securities guaranteed by the New Zealand Government.
* New Zealand corporate securities, denominated in NZ dollars, with a long-term credit rating of BBB- or better.
* New Zealand corporate securities, denominated in NZ dollars with a short-term credit rating of A2, F2, P2 or better.
* New Zealand dollar asset backed securities rated AAA, A1+, F1+ or P1.
A spokesman for the RBNZ said securities guaranteed by the Government that were eligible under the new policy would likely include those issued by some finance companies.
Spencer noted that the liquidity measures did not mean the RBNZ would be lending direct to corporate sector but corporate debt would become more liquid and therefore a more attractive investment prospect for banks and portfolio managers.
