13 January 2010

Even More evidence NZ Big Banks had Ample Funding During the Crisis

As per November's post:

More evidence NZ Big Banks had Ample Funding During the Crisis


As I have previously argued in:

Stuart Nash MP - Financial Alarmist (on the Crown Retail Deposit Guarantee Scheme)
Turning On a Dime: Crown Retail Deposit Guarantee Scheme
Old-style firms favoured in guarantee rejig
NZ Banks Among World's Safest
Proof NZ banks didn't need the government guarantee
Credit crunch? What credit crunch?
What financial crisis? NZ banks doing fine without Crown guarantee
David Bennett & National Party from another planet

The NZ big banks, although heavily reliant on offshore wholesale funding, had and still have ample sources of funding and liquidity, even at the height of the financial crisis when offshore commercial paper markets were supposedly closed.

As I have argued before:
  1. NZ big banks continued to have access to offshore CP markets that were supposedly closed, and this was known to officials (RBNZ and Treasury), who advised the same to the government on 10th Oct 2008, and also that the deposit guarantee scheme was not necessary nor advisable.
  2. NZ big banks had ample alternative sources of liquidity from a) borrowing from their parents, b) selling assets to their parents, and c) using their residential mortgage books to created structured finance securities that the RBNZ would accept as collateral for secured borrowings (i.e. so that the Crown wasn't significantly exposed to any event of bank failure).
Today's post shows that ANZ National Bank, the country's largest bank, had access to billions of dollars from the RBNZ during the height of the financial crisis, on 10th Oct 2008, the Friday before the Sunday the deposit guarantee scheme was introduced. It also shows that it sold nearly $5b in assets to its parent in Feb 2009. From http://anz.co.nz/resources/2/f/2f937980406b85f7b8e2f87a4567b714/GDS-20092411.pdf note 39:

On 10 October 2008, the Banking Group established an in-house RMBS facility that could issue securities meeting the RBNZ criteria. The establishment of the facility resulted in the Parent financial statements recognising a payable and receivable of equal amount totalling $3,721 million to Kingfisher NZ Trust 2008-1 (“the Trust”), a newly established consolidated entity. On 12 December 2008, a further tranche totalling $5,521 million was also sold to the Trust, creating a second payable and receivable of equal amount. These assets do not qualify for derecognition as the Bank retains a continuing involvement in the transferred assets, therefore the Consolidated Group’s financial statements do not change as a result of establishing these facilities.
The RMBS facility is dynamic in nature reflecting the underlying movement in loan balances. To the extent that any loans are found to be ineligible in terms of the RBNZ criteria, they are automatically removed from the facility. Additional lending to existing RMBS customers is added into the facility on a monthly basis.
The establishment of this facility increases the Banking Group’s contingent funding ability from the RBNZ.
On 27 February 2009, $4,877 million of residential mortgage assets were sold to the Australia and New Zealand Banking Group Limited – New Zealand Branch. On 28 July 2009, a second tranche of $4,986 million of residential mortgage assets were sold to the NZ Branch. These assets qualify for derecognition as the Bank does not retain a continuing involvement in the transferred assets. The Banking Group’s net loans and advances have reduced as a result of transferring these assets.

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