Wellington - The New Zealand government will guarantee wholesale deposits by foreign finance institutions to local banks, Finance Minister Michael Cullen announced Saturday. Cullen said the move would help facilitate improved access to international funding markets for New Zealand banks.
"While the New Zealand banking system is very sound, we are in an environment where international investors remain risk-averse and where many other governments have guaranteed their banks," he said.
"In such an environment, the government believes that it is on balance in the public interest to offer a wholesale funding guarantee facility that can help maintain the economy's access to foreign credit."
Cullen said the scheme was similar to that announced by Australia. All New Zealand's major banks are owned by Australian parent companies.
In another move related to the current international financial crisis, Cullen said he had exchanged letters with the major banks relating to their practice when dealing with customersunable to meet their mortgage repayments.
The banks indicated that where there was a reasonable expectation that mortgage-servicing could be resumed within a reasonable period, they would negotiate with borrowers to try to avoid forced sales of property.
