Unlimited ACGB purchases, direct bank funding to support the RBA’s ‘bridge’
The Reserve Bank of Australia (RBA) took unprecedented action on 19 March to provide a “bridge” to an expected economic recovery after the COVID-19 crisis. RBA governor Philip Lowe expects the support package to be required for the foreseeable future but says he can see better times on the horizon.
RBA’s crisis response includes banks, nonbanks, SMEs and securitisation
The Reserve Bank of Australia announced measures on 19 March designed to support the economy. Along with the expected cut to the cash rate and QE – to be delivered in the form of yield-curve targeting – the RBA will roll out a term-funding facility for banks and additional funding for lending to SMEs alongside “a complementary programme of support for the nonbank financial sector, small lenders and the securitisation market”, which the Australian Office of Financial Management (AOFM) will deploy.
Analysts say Australian banks are well placed for funding squeeze
Australia’s major banks are well prepared to support households and businesses as they come under increasing pressure from an economy stalled by COVID-19, analysts and funders say. Even as financial market liquidity becomes more challenged, federal government, central bank and regulatory positioning stands the banks in good stead.
Calls for urgent QE and liquidity support in New Zealand
A stressed market in New Zealand is leading analysts to call for urgent intervention from the central bank. Hours ahead of an expected launch of QE in Australia, the suggestion is that the Reserve Bank of New Zealand (RBNZ) needs to follow suit to prevent further deterioration in local liquidity conditions.
RBNZ announces emergency cut and regulatory relief
Following an emergency meeting of its board, the Reserve Bank of New Zealand implemented an out-of-cycle 75-basis-point cash rate cut and signalled its next step would be to buy government bonds, if necessary. The central bank also delayed implementation of new capital standards for banks by 12 months.