KEY POINTS:
Reserve Bank Governor Alan Bollard and the head of the Treasury Department will visit Hong Kong and New York next week to encourage those markets to lend to New Zealand's banks.
Dr Bollard said international commercial paper markets appear to be re-opening and New Zealand banks are interested in raising funds overseas using the nation's wholesale guarantee. He and Treasury Secretary John Whitehead will be supported by other officials on the visit.
"We are keen that they get back into the international funding markets so that they have enough confidence to keep lending in the New Zealand environment," Bollard said yesterday.
"We're talking to the banks in terms of planning this particular roadshow we're on. We expect some of them to follow us on that and do their own."
Dr Bollard is urging banks to continue to lend on sound business proposals to help New Zealand emerge from a recession that began in the first quarter last year. The strength of New Zealand's banking system, dominated by Australia's four-largest lenders, is a key factor in protecting the nation from the worst of the global financial turmoil, he said.
"We don't want them to put up the shutters," he said.
The Government last year agreed to guarantee bank wholesale funding to make it easier for lenders to participate in global markets. None of the institutions with the guarantee have used it to date. The government this week lowered the fees it charges for the guarantee, saying costs may be discouraging issues.
Local banks haven't needed the liquidity and were also waiting while their Australian parents tested the market seeking funds, Bollard said. Units of Australian largest banks - Commonwealth Bank of Australia, Westpac, National Australia Bank and ANZ - hold more than 90 per cent of all New Zealand deposits.
New Zealand banks are not short of funds and the Reserve Bank will keep providing liquidity "for as long as we need to", Dr Bollard said.
- BLOOMBERG
