NZ Central Bank Chief Says Banking System Sound

October 2, 2008

New Zealand's central bank chief reassured jittery investors this week that the country's banking system remained sound amid the chaos in the United States.

Local shares bounced back strongly on Wednesday, more than making up their three percent losses from the previous day, amid optimism the US Congress would pass a revised 700-billion-dollar rescue package for the stricken US financial sector. Reserve Bank of New Zealand Governor Alan Bollard said there were no major short-term effects on the New Zealand market flowing from the US crisis. Economists too have said New Zealand's banks were less exposed to risky loans than their US and European counterparts.

"The banking system is sound in New Zealand and we do not expect this to alter," Bollard said in a statement. The central bank introduced measures over the last year to make it easier for the financial market to maintain liquidity during international disruption, he added. "While we believe these are sufficient, we are keeping liquidity support arrangements under review and will respond as appropriate," Bollard said, adding that, “the failure of the US Congress to agree the bailout package (at the first attempt) was a disappointment, and it leaves parts of the financial markets in limbo until the matter is resolved."