Source: Reserve Bank of New Zealand
The Reserve Bank of New Zealand (RBNZ) manages the level of liquidity (settlement cash) in the New Zealand banking system to ensure short-term market interest rates trade near the Official Cash Rate (OCR) and that there is sufficient liquidity for payments and settlements.
We have been reviewing our liquidity management framework following changes to the liquidity environment arising from the policy response to the COVID-19 pandemic. Concurrently, we have been reviewing our prudential liquidity policy which is to become a Liquidity Standard as part of the core standards under the Deposit Takers Act.
“Our Open Market Operations are a critical tool for us to manage liquidity as we maintain an ample settlement cash environment. It’s important that we design these operations in a way that delivers effective monetary policy implementation, while also facilitating market liquidity and supporting financial stability,” Financial Markets Director Adam Richardson says.
A Committed Liquidity Facility is necessary for deposit takers to meet their liquidity requirements while also maintaining a sufficient supply of these assets in the market for other investors. “We want to ensure that the size, fees and operationalisation of the Committed Liquidity Facility will serve the overall objectives of the forthcoming Liquidity Standard whilst also supporting the market liquidity of liquid assets,” Mr Richardson says.
This consultation builds upon previous work, including speeches and Bulletins given as part of the Liquidity Management Review. Respondents to the consultation may choose to comment on one or both parts of the consultation and whichever questions are relevant to them.
This consultation is open until 31 October.
You can find out more about the consultation on the Citizen Space website: https://govt.us20.list-manage.com/track/click?u=bd316aa7ee4f5679c56377819&id=c56a8c1b07&e=f3c68946f8
More information
Liquidity Management Review consultation paper: https://govt.us20.list-manage.com/track/click?u=bd316aa7ee4f5679c56377819&id=22103ebfc4&e=f3c68946f8
