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About a month ago, RBNZ sources were suggesting introduction of a new window for registered banks and perhaps even qualified non-banks, to put up 'alternative' securitised debt as collateral for 'lender of last resort' facilities to provide assistance for up to 12 months.
So far, nothing has been officially announced, but such a move would be good remedy to establish equilibrium in our 'running scared' market environment. Investor shock is here, and who is brave enough to prevent it?
Not only do well managed finance companies inherently 'borrow short and lend long' - but all our banks do it too. When investors start to doubt reinvestment decisions, they turn to quality, and even good quality audited accounts mean nothing to 'the herd'. Only perception reigns and who influences perception?
Recent finance company collapses, including (it appears) Dominion, have happened due to liquidity issues. Is the quality of finance company debt assets any better or worse than those of the banks? Finance co's are typically geared 12:1, whereas banks reach 18:1. Considering the cause, and quickly providing a viable remedy may save next week's 'bad news' story.
C'mon RBNZ and political leaders! Please do something positive for us ordinary Kiwis.
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