Friday, the Reserve Bank of New Zealand revealed two new facilities meant to support banking system liquidity amid turbulence in offshore markets.
First, the central bank announced a Term Auction Facility, which will operate in a similar manner to the Reserve Bank's Open Market Operation (OMO) and will be used to inject cash into the banking system using approved eligible collateral.
The RBNZ also launched Reserve Bank bill (RB bill) tenders. The central bank said it will hold a weekly RB bill tender, as required, to withdraw cash from the banking system and sterilize, either partially or fully, the cash injected via the TAF to maintain settlement cash at an appropriate level.
The central bank noted that the RB bill is an existing instrument but has not been on issue since 1999.
In a statement, the RBNZ said the new facilities follow up its earlier announcement in May 2008 that it would accept Residential Mortgage Backed Securities (RMBS), as security in its Domestic Market Operations.
"Two banks have recently announced that they have had RMBS structures approved by the Reserve Bank and more approvals are expected", the central bank added.
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