New Term-Lending Facility to help businesses

New Term-Lending Facility to help businesses

Venkat Raman
Auckland, April 2, 2020

RBNZ Governor Adrian Orr

Reserve Bank of New Zealand (RBNZ) has introduced a longer-term funding scheme for commercial banks as a part of its support to the Business Finance Scheme announced by the government last week.

RBNZ Governor Adrian Orr said that the new Term-Lending facility (TLF) will help promote lending to businesses in New Zealand.

The TLF is similar to the recently announced, Term Auction Facility (TAF), and both provide liquidity to the banking system, he said.

Access to money

Mr Orr said that the new facility will ensure access to funding for banks at low interest rates for up to three years duration, which is longer than the Bank’s other liquidity facilities.

“We are working in-step with the government and the country’s banks to provide the economic support that is crucially needed during this uncertain time. New Zealand’s financial system remains sound, with strong capital and liquidity buffers. We are confident that the financial system is well placed to respond to the impacts of coronavirus,” he said.

Assistant Governor and General Manager (Economics, Financial Markets and Banking) Christian Hawkesby said that RBNZ is currently engaging with banks on the operational details of the scheme, aimed at launching the first TLF operation in May.

Assistant Governor and General Manager Christian Hawkesby (RBNZ Photo)

Mitigating effects

“As previously announced, the Reserve Bank’s Monetary Policy Committee has worked to mitigate the severe economic effects of COVID-19 by reducing the Official Cash Rate and implementing a Large Scale Asset Purchase programme, he said.

“In addition, RBNZ has deferred the start of increased capital requirements and is delaying planned regulatory initiatives, to allow banks to focus on lending to their clients during the disruption of COVID-19,” he said.

Do dividend pay-out

Deputy Governor and General Manager (Financial Stability) Geoff Bascand said that RBNZ has agreed with banks that there will be no payment of dividends on ordinary shares during the current health crisis.

RBNZ Deputy Governor Geoff Bascand (INL File Photo)

“We have also agreed with the banks that they should not redeem Non-Common Equity Tier 1 capital requirements. This is to support the stability of the financial system during this period of economic uncertainty. The restrictions take effect from today under revised Conditions of Registration issued to all locally-incorporated banks. They will remain in place until further notice, with the aim of relaxing them when the economic outlook has sufficiently recovered,” he said.

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