RBNZ consults on new mortgage bond collateral standard

RBNZ says the proposed standard will support market lenders

RBNZ consults on new mortgage bond collateral standard
The Reserve Bank has published a consultation paper on a proposed enhanced mortgage bond standard, which is aimed at supporting confidence and liquidity in the financial system.

RBNZ said a more standardised and transparent framework for mortgage bonds would improve the bond’s quality and making them more marketable. In line with this, the bank developed a proposed new format for mortgage bonds, called residential mortgage obligations (RMO).

The bank said the proposed new collateral standard would:
  • Improve the risk position of the Reserve Bank by promoting the use of higher quality and potentially more liquid, mortgage bonds as collateral in the Bank’s lending operations;
  • Support New Zealand market lenders by creating an additional funding instrument for residential mortgages; and
  • Promote a deeper capital market through the availability of simple, comparable and transparent mortgage bond instruments.
The proposed standard is consistent with international policy guidelines aimed at promoting simpler and safer secured bonds, the bank said.

RBNZ is seeking feedback on the terms, which it should accept mortgage bonds as collateral, and the proposed new RMO standard.

The consultation closes on February 16, 2018.


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