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Treasury has announced that MARAC Finance Limited has been approved for the extended Crown guarantee scheme, its first such approval. (Updated with comment from the company.)

This extended guarantee period starts on October 12, 2010 when the existing arrangements expire, and runs until December 31, 2011.

Marac, who currently has a credit rating of BB+, has signed up for the guarantee which will cost it a fee of 1.2% for all guaranteed funds if it maintains that rating.

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BNZ has followed ASB’s move yesterday by raising its six month term deposit rate to 4.8% for deposits over NZ$10,000.

See and compare all deposit rates for terms less than one year here, and terms one year and greater here.

BNZ raised its six month deposit rates by around 160 basis points, at the same time cutting its four month rates from 4.6% to 3.4% for the NZ$10,000 tier, 3.45% for the NZ$50,000 tier and 3.5% for the NZ$100,000 tier.

Banks have been raising both their term deposit rates and fixed mortgage rates in recent months in anticipation of increases in the Official Cash Rate later this year and as they compete hard for retail deposits. The Reserve Bank’s new prudential liquidity guidelines are pushing banks to get their funding from more stable sources, rather than ‘hot’ short term international money markets.

These stable sources include longer term wholesale bond issues and ‘retail’ deposits from ‘Mums and Dads’ in New Zealand.

Taranaki-based bank TSB has hiked a number of its longer term deposit rates by between 15 and 50 basis points (bps). Deposit rates rose from the second half of 2009 after new Reserve Bank guidelines led banks to fight harder for local deposits. SBS Bank has also hiked a number of deposit rates.

For deposits over NZ$10,000, TSB hiked its 18 month term investment rate by 15 bps to 5.25%; its two year rate by 25 bps to 5.5%; three year by 25 bps to 6%; and four year by 25 bps to 6.5%. One basis point is 0.01%. These hikes follow similar moves by Westpac earlier in the week.

See and compare all term deposit rates for terms less than one year here,and terms one year and greater here
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After pouring mammoth volumes of credit into the US banking system to save their economy from a catastrophic meltdown, the Federal Reserve is now planning to extract some of that liquidity.

It has been signaling some credit withdrawal actions recently, and earlier this month its New York office held a live test of “reverse repos” – selling Treasuries to dealers for cash with an agreement to buy them back later at a slightly higher price.

Now, it has raised the idea of paying interest on deposits to encourage banks to “invest” at the Fed for a stated time period – a term deposit. In this way, funds flow out of the economy and are locked up by the Fed, effectively withdrawing “excess money” that was pumped in earlier to combat the financial crisis.

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SBS Bank has upped the ante in the scrap for local funds by introducing new market leading rates for shorter term deposits with a minimum deposit of NZ$5,000. The bank war for deposits in New Zealand has been intensifying in recent months as the bigger banks fight for more local funding. This follows a Reserve Bank drive to wean the big Australian-owned banks off their dependency on short term ‘hot money’ sourced from global wholesale money markets.

For a minimum deposit of NZ$5,000, SBS raised its 5-6 month ‘Term Investment Specials’ (interest paid quarterly) by 35 basis points (bps) to 4.75%. The new five month rate at this level is now the highest offered by a New Zealand bank, while the new six month rate is equal to a TSB offer which requires a minimum deposit of NZ$10,000.

SBS also raised its 9-12 month special (interest at maturity) by 15 bps to 5.15%. This is now the highest nine month rate offered by a bank in New Zealand.

At the same time, SBS cut its three month special by 75 bps to 4%. This is still the highest three month rate offered by a New Zealand bank for the NZ$5,000 tier.

See and compare all deposit rates offered in New Zealand for terms less than one year here, and for terms one year and greater here.

ASB cut a number of its deposit rates over the weekend that were at the top end of the market as it raised its one year rates. The moves come as competition for local deposits has been increasing in recent months, with new Reserve Bank prudential liquidity guidelines putting upward pressure on bank term deposit rates. ASB’s moves were for deposits over NZ$10,000.

ASB raised its one year deposit rates by 15 basis points (bps) to 5.15%, lifting it ahead of offers by other banks, although it is equal to a special offer by SBS Bank (min. NZ$5,000). See all deposit rates for terms less than one year here, and for terms one year and greater here.

New guidelines proposed by the Reserve Bank in June require the banks to raise more funds locally and for longer terms in an effort to reduce their dependency on short term ‘hot money’ sourced from global wholesale money markets. This has put pressure on banks’ interest rate margins and forced them to raise deposit rates as they fight harder for local funds. The competition has been such that state-owned Kiwibank, which has until this year sourced all of its funds locally, was forced to raise money offshore back in October.

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