The New Zealand government announced on Saturday that it will guarantee wholesale bank deposits.
Under the scheme, the government will offer a guarantee to overseas institutions which lend money to banks in New Zealand.
Finance Minister Michael Cullen announced on Saturday that the government will offer a wholesale funding guarantee facility to investment-grade financial institutions in New Zealand.
The decision will help to facilitate improved access to international funding markets for New Zealand banks, a key channel through which New Zealand's substantial external financing needs are met, Cullen said.
"While the New Zealand banking system is very sound, we are in an environment where international investors remain risk-averse and where many other governments have guaranteed their banks' debt. In such an environment, the government believes that it is on balance in the public interest to offer a wholesale funding guarantee facility that can help maintain the economy's access to foreign credit," Cullen said in a statement.
The Treasury and Reserve Bank will release shortly full details of the facility, including scope and coverage, term and pricing.
Other countries, including Australia, have started offering the same guarantee and there were fears that if New Zealand didn't follow suit, banks could run short of money to lend to businesses and households.
The New Zealand government has already agreed to guarantee the retail deposits of savers up to a value of 1 million NZ dollars (582,000 U.S. dollars) each.
Source:Xinhua
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