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With local banks yet to avail themselves of the Government's wholesale funding guarantee, Treasury has slashed the fees that apply to the facility on money raised for terms of more than 12 months and trimmed the charges on shorter maturities.
The scheme was announced in November at the same time as Australia's Government introduced a similar, albeit cheaper facility.
While the big Australian parents of New Zealand's major banks have used the Australian facility, no local banks have done so here. On the other hand, the Herald understands the Reserve Bank's Term Auction Facility, by which banks can access liquidity direct from the central bank, has been tapped more than anticipated.
Yesterday Treasury Secretary John Whitehead announced that the fee for institutions rated AA- or better using the facility to raise money for maturities less than a year would drop from 85 basis points on the sum raised to 70. On maturities over one year the charge is now 90 basis points rather than 140 previously.
Whitehead noted the lack of take-up to date but also said banks had been able to raise short-term offshore funding without the guarantee.
"However, raising term funding was important to adequate availability of credit to firms and households this year.
"The cost of raising term funds by banks in other countries, operating under their guarantees, had proved much higher than anyone expected. It is appropriate to reduce the guarantee fee, and for the cut to be focused on the terms beyond one year," Whitehead said in a statement.
At 80 basis points on maturities of a year or more, the New Zealand scheme is now just 10 basis points more expensive than the Australian one.
