Sunday, October 12, 2008

How are New Zealand's banks really doing?

We were told on Morning Report Friday morning that the Reserve Bank believes that New Zealand banks have $60 billion of overseas debt to turn over in the next 40 days. I've listened to that several times to be sure that is really what was said.

That figure appears to be nearly half of New Zealand's GDP.

My limited understanding of the situation at the moment is that internationally banks are simply not lending money to other banks.

Worse still other nations are moving to guarantee or buy stock in their banks. Australia seems likely to increase its guarantees on its banks (which admittedly own ours) in the next few days.

We're told that the Reserve Bank has moved to allow banks to borrow from it secured by the value of mortgages. However I can't help noticing that the total value of New Zealand houses is about $2.11 billion, so there better be some hefty mortgages on commercial property out there if that's really going to solve the problem.

Could someone, preferably the boss of a bank and the leader of a major party, say something reassuring but convincing about the position of New Zealand's banks?

Finally, if you were Jim Anderton and you'd set up a government owned bank that doesn't borrow overseas you would have to be pretty happy with yourself.

Update: Clark has just announced a deposit guarantee scheme.

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