November 16, 2017 / 11:18 PM / a year ago

RBNZ plans new standard for mortgage bonds to spur debt market activity

WELLINGTON, Nov 17 (Reuters) - New Zealand’s central bank said on Friday that it planned to introduce a new standard for mortgage-backed bonds to reduce risk and boost liquidity in the country’s debt market.

The Reserve Bank of New Zealand (RBNZ) said in a consultation paper on its website that it wanted to promote the quality of mortgage-backed loans, which it accepts as collateral in its lending operations.

It hoped the new rules would pave the way for wider trading of mortgage-backed securities issued by banks and wholesale lenders.

“As well as protecting the Reserve Bank, revisions to these terms may support future debt capital market development by making mortgage bonds less risky and therefore more attractive to a broader range of investors,” the RBNZ said.

This could create a new stable funding option for home loan lenders and lessen the likelihood of lenders needing to borrow from the RBNZ too quickly if liquidity demands increased temporarily.

The bank would seek feedback on its planned standards until Feb. 16.

Reporting by Charlotte Greenfield; editing by Richard Pullin

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