Reserve Bank arranges cash-swap facility
New Zealand's Reserve Bank has put in place another measure to help banks through the credit crunch, announcing a cash swap facility with the United States Federal Reserve.
Reserve Bank head of communications Mike Hannah said there was no dire need for it but it was in place if needed.
The precautionary arrangement would provide the New Zealand market with amounts of up to US$15 billion (NZ$27.94 billion) in US-dollar cash. It has been authorised till April 30 next year.
Mr Hannah said the swap line ensured New Zealand banks had access to US dollars overnight or for short terms.
The US Federal Reserve had established swap lines with other central banks around the world in the past few weeks.
The Reserve Bank would swap New Zealand dollars or other currencies for US dollars and lend that to the banks which were charged a margin over a given international rate.
The central bank would pass those earnings on to the Federal Reserve so there was no cost to itself, Mr Hannah said.
Deputy Reserve Bank governor Grant Spencer said though there was no need to use the facility right now, "it is useful to have this capacity if markets become dysfunctional".
The Reserve Bank has introduced other measures to shore up banks' access to funding if international credit lines dry up.
In May it announced it would take the banks' prime mortgages as collateral for credit.
Two of the big banks - ANZ National and Westpac - have packaged up the prime mortgages in the legal form required by the central bank.
The two other large banks are in the process of doing so.
The Dominion Post