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Wednesday, the Reserve Bank of New Zealand said it was removing some of the temporary emergency liquidity measures put in place to tackle the financial crisis in 2008.
The central bank said it was removing the Term Auction Facility or TAF, whereby banks could borrow funds using bills, government securities and mortgage backed securities as collateral. The bank is also withdrawing the regular weekly Reserve Bank bill tender, but will continue to offer Reserve Bank bills as required in the daily open market operation.
Further, the New Zealand central bank said it would allow all eligible securities to be acceptable as collateral for repurchase transactions of maturity up to three months for the regular Tuesday Open Market Operation or OMO. Currently, only approved Corporate and Asset-backed securities are acceptable as collateral in this facility for terms of up to two months.
The regular weekly OMO will continue until the end of March 2010 when it will be reviewed with a view to discontinuing it if market conditions allow, the central bank said. Further, the maximum term over which funds may be borrowed from the bank in the Overnight/Term Reverse Repo Facility (ORRF/TRRF) was shortened from one month to an overnight.
Commenting on the measures taken, the central bank's Deputy Governor Grant Spencer said, "Financial market conditions have improved significantly since 2008 when these facilities were introduced. New Zealand banks are now able to readily access funding from the markets, and the usage of these special facilities has been very low in the last six months." The changes will come into effect from the start of November.
"This decision has no implications for the stance of monetary policy", he added. The central bank will continue to monitor markets closely and is ready to supply sufficient liquidity as required depending on market conditions via its regular OMO, Spencer said.
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