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Submissions received on new mortgage bond standard

Submissions received on new mortgage bond standard, update on repo-eligibility conditions

12 August 2019

The Reserve Bank has today published a summary of submissions on its consultation proposing a new mortgage bond standard aimed at supporting confidence and liquidity in New Zealand’s financial markets.

Submissions on the new proposed mortgage bond standard are broadly supportive of the introduction of a high grade residential mortgage backed securities framework for New Zealand – known as Residential Mortgage Obligations (RMO).

The new standard aims to reduce contingency risks for the Reserve Bank as a lender of last resort, ensuring financial intermediaries supply sufficient high quality and liquid assets. The standard also aims to provide issuers and investors with an additional funding and investment instrument, supporting the development of deeper markets.

Assistant Governor and General Manager of Economics, Financial Markets and Banking Christian Hawkesby said he was pleased with the range and depth of feedback received during the consultation process.

“The consultation process has been successful in delivering improvements to the initial concept for a new mortgage bond standard to support financial intermediation, liquidity management and funding in New Zealand’s markets.”

The feedback from issuers, investors and other market participants has been constructive and it will help inform the Reserve Bank’s final policy decision which is expected to be published by the end of 2019.

The Reserve Bank has decided to update repo-eligibility conditions for RMBS (https://www.rbnz.govt.nz/markets-and-payments/domestic-markets/application-criteria-for-security-eligibility/application-criteria-for-acceptance-of-residential-mortgage-backed-securities-in-reserve-bank-domestic-operations?utm_source=Reserve+Bank+of+New+Zealand&utm_campaign=1113a09b27-EMAIL_CAMPAIGN_2019_08_11_10_05_COPY_01&utm_medium=email&utm_term=0_c0c0e9bb78-1113a09b27-25504821) in the transition to the final RMO policy. This includes a new approval process and requirement for a more detailed RMBS reporting template.

More information:
* Review of mortgage bond collateral standards (https://www.rbnz.govt.nz/markets-and-payments/domestic-markets/review-of-mortgage-bond-collateral-standards?utm_source=Reserve+Bank+of+New+Zealand&utm_campaign=1113a09b27-EMAIL_CAMPAIGN_2019_08_11_10_05_COPY_01&utm_medium=email&utm_term=0_c0c0e9bb78-1113a09b27-25504821)
* Application criteria for acceptance of RMBS (https://www.rbnz.govt.nz/markets-and-payments/domestic-markets/application-criteria-for-security-eligibility/application-criteria-for-acceptance-of-residential-mortgage-backed-securities-in-reserve-bank-domestic-operations?utm_source=Reserve+Bank+of+New+Zealand&utm_campaign=1113a09b27-EMAIL_CAMPAIGN_2019_08_11_10_05_COPY_01&utm_medium=email&utm_term=0_c0c0e9bb78-1113a09b27-25504821)

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