Press Release – New Zealand Government

The Government will close New Zealand’s wholesale funding guarantee on 30 April 2010, Finance Minister Bill English announced today. Wholesale funding guarantee to end on 30 April

The Government will close New Zealand’s wholesale funding guarantee on 30 April 2010, Finance Minister Bill English announced today.

“The wholesale funding facility was set up in November 2008 when the liquidity crisis had hit global markets,” he told the New Zealand Australia Investment Forum in Auckland today.

“It helped our banks access funding during that crisis, but international market conditions have improved – and continue to improve in 2010. New Zealand banks are now raising funds without using the guarantee, which was always envisaged as a temporary measure for extraordinary times.”

Mr English’s announcement follows confirmation last month that the Australian wholesale funding guarantee will end on 31 March. Other countries have also ended their guarantee schemes or are in the process of doing so.

The wholesale guarantee facility is separate from the retail deposit guarantee scheme. No changes are planned for the retail deposit scheme beyond those announced last year, which take effect from 13 October 2010.

Since the wholesale guarantee was set up, 24 guarantee certificates have been issued, covering $10.3 billion of borrowing by banks. The scheme has made no payouts and the Government will receive almost $290 million in fees.

“Banks in New Zealand are now successfully raising funds in the wholesale market without using the wholesale guarantee and we don’t expect there will be any further use of the facility between now and the end of April.”

The Treasury and Reserve Bank have consulted with the major New Zealand banks – along with some international investment banks – in recent weeks.

“In general, the feedback was that they were all looking to raise non-guaranteed funds and have no plans to further use the New Zealand wholesale guarantee,” Mr English said.

Scheme details: http://www.treasury.govt.nz/economy/guarantee/wholesale

ENDS

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