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Reserve Bank's Core Funding Ratio hailed a success by the IMF

Reserve Bank's Core Funding Ratio hailed a success by the IMF

By Gareth Vaughan

The International Monetary Fund (IMF) says the Reserve Bank's Core Funding Ratio (CFR) has achieved its aim of reducing New Zealand's major banks' reliance on short-term funding, and might have even impacted credit growth.

In a report entitled Key Aspects of Macroprudential Policy the IMF notes efforts made by New Zealand and South Korea with macro-prudential liquidity tools.

From April 2010 the Reserve Bank introduced the CFR in a move designed to reduce New Zealand banks' reliance on short-term overseas borrowing. The CFR currently sets out that banks must secure funding for at least 75% of their lending from equity, retail deposits, and wholesale sources such as bonds (including covered bonds) with durations of at least a year.


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