Reserve Bank announces further liquidity measures

The Reserve Bank today announced further measures to support the New
Zealand debt markets and financial system liquidity, in response to the
current financial market stress.
Deputy Governor Grant Spencer said the measures are similar to actions
taken by other central banks in the wake of the global financial market
turmoil.

"Following a number of similar measures adopted earlier in the year, we
are taking these steps to further enhance system liquidity and ease some
of the current pressures on corporate sector funding," Mr Spencer said.

The new measures, most of which will take effect from 17 December,
include the following:

* Extension of the range of securities eligible for acceptance in
the Reserve Bank's domestic liquidity operations to include:
- Securities guaranteed by the New Zealand government;
- Highly rated NZ corporate securities, denominated in NZD, with a
long term credit rating of BBB- or better;
- Highly rated NZ corporate securities, denominated in NZD, with a
short term credit rating of A2, F2, P2 or better; and
- NZD Asset Backed Securities rated AAA, A1+, F1+ or P1.
* The current graduated 'haircut' regime will apply for all
securities eligible for domestic liquidity operations.
* All issues will be approved on a case-by-case basis.

Mr Spencer noted that these liquidity measures did not mean the Reserve
Bank would be lending direct to the corporate sector. However,
corporate debt will become more liquid and therefore a more attractive
investment prospect for banks and portfolio managers.

Mr Spencer emphasised that the measures had no implications for the
Bank's monetary policy stance.

Further details of the measures will be available on the Bank's website
on Monday (www.rbnz.govt.nz). The changes are seen as temporary, to be
kept in place while global markets remain unsettled.