KEY POINTS:
Finance Minister Michael Cullen says he will "take full notice" of what National said about the banking guarantee schemes - a response to John Key's call for a more bipartisan approach and more urgency in finalising schemes.
But Dr Cullen stopped short yesterday of saying he would actually involve National Party finance spokesman Bill English in the decision-making.
He said he welcomed the "re-assertion" of support for a bipartisan approach to finance sector regulation by Mr Key, the National Party leader.
Mr Key said yesterday that he did not see an imminent crisis in the banking sector but he wanted greater certainty, and sooner.
"At a time when confidence will play an important role in our economy, more certainty sooner should be our goal," he said at a press conference at Parliament.
"I am therefore making this statement because I want to confirm to [Prime Minister] Helen Clark and her colleagues that the National Party is prepared to work with them to ensure that decisions can be made during this election period, when it would be easy for politics to get in the way."
Mr Key said he was particularly concerned with making progress on any wholesale lending guarantee scheme that covers the banks' lending to other banks.
But several hours before Mr Key held his press conference, Dr Cullen had confirmed on Agenda that the Treasury and the Reserve Bank were working on a possible scheme applying to wholesale lending.
He said it was very complex because New Zealand had a financial sector overwhelmingly owned overseas, there was no need to rush, and final decisions had not been made.
Dr Cullen had been advised by the Reserve Bank that the banks in New Zealand - most of which are Australian-owned - were not facing any crisis and that the credit lines were secure.
And he indicated that caution was needed to ensure that New Zealand taxpayers did not end up taking all the risk for the shareholders of foreign-owned banks.
"What I'm very conscious of and very concerned about is that as a very small country with only a very small part of the financial sector owned within the country we don't end up with effectively open-ended guarantees to people offshore, which effectively gives a benefit to offshore shareholders and offshore-owned institutions," the minister said on Agenda.
Dr Cullen said the banks in New Zealand would probably need to renew some of their existing loan facilities before Christmas.
Mr Key said getting a scheme sorted by Christmas was too far away and greater urgency was needed.
The result of a scheme not being sorted would be higher interest rates. "In this time of uncertainty, wholesale funds will flow to safe havens."
That applied to wholesale funds within New Zealand as well.
There was a risk that local financial institutions would decide to shift some wholesale deposits out of New Zealand banks and put them in Australian banks where their deposits would be guaranteed.
"The banks would, over time, have less money to lend to New Zealand businesses and New Zealand households, and that lending would become more expensive."
Mr Key believed that a bipartisan approach would speed the process because officials would not be "distracted by the election".
Work being doing between Australia and New Zealand would not be contingent on a particular election result, the National leader said.
Mr Key, a former merchant banker, said he had spoken last week to most chief executives of the major banks.
He estimated the value of the wholesale deposits at about $300 billion - the value of the retail deposits under Government guarantee are about $150 billion.
The Government last week announced a guarantee scheme for retail deposits in New Zealand's mainly Australian-owned banks and other qualifying institutions that take deposits such as building societies and credit unions.
Australia has announced guarantees relating to both retail deposits and wholesale deposits.
