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Reserve Bank to raise Settlement Cash Level

31 January 2006,

Reserve Bank to temporarily raise Settlement Cash Level

The Reserve Bank of New Zealand will temporarily raise the Settlement Cash Level (SCL) from its current level of $20 million to $500 million, for value date 2 February 2006. The SCL is the amount of cash that the Reserve Bank targets to leave in the banking system each day.

This change in the settlement cash level reflects the Reserve Bank's concern over recent liquidity pressures in the New Zealand financial market, which it expects will be exacerbated by the upcoming New Zealand Government Bond maturity on 15 February 2006. The bond maturity will reduce the amount of collateral available for banks to use to raise funds for their intra-day liquidity, to meet payment and settlement obligations.

The Reserve Bank will review the impact of this increase over the following days and may increase the SCL further, if it considers this appropriate. This is a technical adjustment to the way the Reserve Bank conducts its liquidity management operations and all other aspects of its daily operations will remain unchanged. This change has no monetary policy significance.

The Reserve Bank will reassess the SCL on an ongoing basis.

Technical information on how the Reserve Bank conducts its liquidity management operations can be found in the December 2004 Bulletin located on the Reserve Bank's website (


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