Bank guarantee scheme to cover wholesale deposits
Finance Minister Michael Cullen has confirmed the government is likely to extend the recently announced retail-banking guarantee to wholesale deposits.
Speaking on Sunday’s Agenda programme (TV One), Dr Cullen said: “I’m receiving advice around the possible outlines of a wholesale scheme, we’ve obviously been working on that. We will need to be able to give the markets and the banks and others a clear indication of what’s happening going forward.”
The retail scheme announced last week doesn’t cover funds banks access from international wholesale market and there are fears banks could run out of cash if borrowings cannot be extended.
But Dr Cullen said banks were not facing a crisis in the short term, giving the government time to work on details of an extended scheme.
“They will get to a point probably this side of Christmas where they will be needing to review some of their existing loan facilities; now we have plenty of time to work through what an appropriate response might be,” he said.
Dr Cullen emphasised there was no need to rush the scheme through and it was crucial that it be carefully designed to suit New Zealand’s financial sector, which is overwhelmingly owned offshore.
“What I’m very conscious of and very concerned about is that as a very small country with only a very small part of the financial sector owned within the country we don’t end up with effectively open ended guarantees to people offshore, which effectively gives a benefit to offshore shareholders and offshore owned institutions.”
However, Dr Cullen conceded a plan of some sort was needed to give confidence to the markets and banks.
“Clearly we can’t leave the New Zealand banking sector exposed where there is a risk that money will all go to other financial systems because they have such guarantees.”
Signup to free NBR email alerts here
Back to home
Back to top
Print
Email
Share
Delicious
Digg
StumbleUpon
Reddit
Google
Yahoo
Technorati
Scoopit
NBR SERVICES
SUBSCRIPTIONS
Sign up for NBR subscriber content or email alerts
Latest
Comments and questions4
I trust that people will see that in the current economic climate and the challenges that lay ahead (and there will be many more to come) that we need a party to govern us that has some business nous & experience. I think that Labour has proven to us with its squandering over the past 3 terms that tit hase very little business sense. Our country could potentially have been in a very positive different place had the past 2 terms have been operated in a true business sense.
Until john key mentioned the likely scenario re banks and their need to attract overseas investment early next year, Cullen and Clark were quite happy to let things drift along; since neither of them have the experience,or background to recognise the pending money crisis early in the new year.
If there are about a million households in New Zealand and Cullen is talking about giving a Government Guarantee of $450 billion to the wholesale banking sector, why doesn't he guarantee every household for $450,000 each? Its suffering New Zealanders not international banking institutions that need to be bailed out. Anyway Key will know how to sort out Cullens mess
It's proven and people has seen past economic climate and the challenges that lay ahead that we need a party to govern us that has some business nous & experience to cover wholesale deposits.
Post new comment or question
To share this article, click on a service below