Radio New Zealand - Te Reo Irirangi o Aotearoa

Government guarantee may cover $40bn

Updated at 9:50 pm on 6 December 2008

The Government may have to guarantee up to $40 billion of borrowing by New Zealand based banks in the next six months to ensure there is enough cash to keep the economy going.

In papers released on its website, Treasury said that is the likely size of the Government guarantee if financial market conditions remain difficult.

The former Labour-led Government agreed to guarantee wholesale bank deposits because of the world financial crisis.

It announced a guarantee on domestic deposits for up to two years on 12 October, and extended it to cover offshore borrowing by banks on 1 November.

The decision is seen as essential to ensuring New Zealand based banks can roll over large loans which come up for renewal in the next six months.

If the guarantee had not been given, access to that money might have dried up, creating problems for the banks and the economy as a whole.

Listen to political editor Brent Edwards on Morning Report

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