RBNZ removes COVID liquidity facilities

Lynn Grieveson

The Reserve Bank of New Zealand is removing some of the temporary liquidity facilities put in place at the start of the COVID-19 pandemic, saying market conditions have improved and banks have not been making use of the facilities.

On the way out are:
- the Term Auction Facility (TAF) where banks have been able to borrow funds for three, six and 12 months using eligible collateral, including NZ Government securities, registered bank bills and Residential Mortgage Backed Securities (RMBS); and
- the Corporate Open Market Operation (COMO) where banks have been able to borrow funds for three months using eligible collateral, including corporate securities and asset backed securities.

“Financial market conditions have improved significantly since March 2020 when these facilities were introduced and the usage of these special facilities has been very low in the last six months,” said the RBNZ’s Head of Financial Markets, Vanessa Rayner.

In addition, the Large Scale Asset Purchase, Term Lending Facility, and Funding for Lending programmes have resulted in a significant increase in system liquidity and a lower cost of funding for banks.”

“The Reserve Bank will continue to monitor market conditions closely and is in a position to supply liquidity as required via its daily Open Market Operations or the reinstatement of these special facilities in the future if needed,” Rayner said – adding the disclaimer that the decision had “no implications for the stance of monetary policy”.

The final TAF and COMO tenders will be held on 16 March 2021.