New Zealand: Technical Details for New Liquidity Measures
May 7th, 2008If you’re thinking about buying property in New Zealand—hold off. Things are going to get weird.
Via: Reserve Bank of New Zealand:
The Reserve Bank is in the process of adopting new measures to guard against further disruptions to banking system liquidity arising from international financial market turbulence. These changes are seen as temporary, to be kept in place while global markets remain unsettled. The Reserve Bank’s liquidity arrangements will be further reviewed in 12 months time.
The Reserve Bank is extending the range of securities that will be eligible for acceptance in its domestic liquidity operations.
Research Credit: GT
Posted in Economy | Top Of Page
So this means our Reserve Bank is expecting to ‘need’ to follow the same path that the Fed and European central bank(s) have gone down does it?
We’re looking to buy but at times like this it’s hard to know where our money is safe (while we wait) – although I have found that the governent-owned Kiwibank does guarantee it’s deposits – with 3 months notice of a change of policy, so it could be worse.
After the Aussies implement their deposit insurance scheme, name the only country in the OECD without deposit insurance:
New Zealand.
There are three very absurd situations in New Zealand that are the result of spineless/non existent/corrupt leadership.
1) The electricity cartel: Where’s net metering? Virtually no incentives to do anything with clean energy on the individual level. Possible electricity crisis this winter? Totally ridiculous.
2) Telecom: It’s crap all around, it’s expensive and there’s no “market solution” to this mess. It’s also a brewing national security problem. After supporting the All Blacks, I think hating Telecom is next favorite Kiwi passtime.
3) No deposit insurance. There’s no excuse. Regardless of Reserve Bank weasel speak, NZ now stands alone on this issue.
Rabobank is, by far, the best option for safety of deposits. Its capitalization is larger than the rest of the banks operating in NZ combined. It is also the only bank operating here with a AAA credit rating, whatever that means now.
We use Kiwibank for our everyday banking needs, but our savings is with Rabo.
Kevin – Kiwibank is owned by New Zealand post (who are owned by the government) and NZ Post guarantees all it’s deposits. If they were to change this policy they say there would be three months notice.
I have no idea whether you knew that or not but given that information I’m curious to know if you still think Rabobank is a better place to deposit savings.
BTW curious that out of the three issues you mention people only seem focused on number 2 and won’t even notice 1 & 3 until it’s too late.
Aaron, I think you’re referring to this statement from KiwiBank’s about page:
New Zealand Post Guarantee
New Zealand Post Limited, our parent company, has guaranteed our payment obligations, including any payment obligation in respect of any deposit made with us. The guarantee does not apply to payment obligations where the terms of the obligation expressly provide in writing that the obligation will not have the benefit of the guarantee. This means that the guarantee does not apply to unsecured, subordinated bonds issued by us. The guarantee is not secured and its amount is not limited. The guarantee is unconditional and is terminable by New Zealand Post Limited upon three months’ notice to us. Any such termination does not affect any existing payment obligations owed under the guarantee at the termination date.
Here’s the sentence to focus on:
The guarantee is not secured and its amount is not limited.
More specifically:
The guarantee is not secured
Ok, so what we have is NZ Post making an unsecured guarantee on KiwiBank’s deposits. That’s fine. The question, then, becomes: What’s the credit rating of New Zealand Post Limited? What’s NZ Post’s ability to fulfill its obligations to its creditors, like you and me?
According to this KiwiBank document:
http://www.kiwibank.co.nz/about/pdf/key_information_summary_dec07.pdf
NZ Post has a S&P credit rating of AA-.
Rabobank’s S&P credit rating is AAA.
Aha! read the fine print first. Interesting that the person on the phone who told me about the guarantee didn’t mention that part of it.
I guess since NZ Post is owned by the government that it ultimately comes down to the attitude of the government at any given moment as to whether they prop the whole thing up or whether they just let it hang. It’s probably not something anyone would want to rely on I should think.
Thanks for your thoughts Kevin.