Radio New Zealand - Te Reo Irirangi o Aotearoa

Reserve Bank ready to support local banks if crisis worsens

Updated at 9:49 pm on 3 February 2012

The Reserve Bank has told the Government it is ready to reinstitute support systems for local banks should the financial crisis in Europe worsen.

In its post-election briefing to the Minister of Finance the central bank says local banks should be able to meet modest increases in demand for credit as the economy recovers.

But it says if global financial markets worsen, it is ready to reinstitute emergency lending facilities as it did during the crisis in 2008.

The Reserve Bank also says it is prepared to go beyond new international rules for strengthening local banks' balance sheets if necessary.

And it says it is also working on tools to rein in price bubbles for assets such as farms and houses.

That could include placing caps on the amount banks can lend to buyers of those assets.

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