Finance Minister Grant Robertson, retail banks & the Reserve Bank announced a financial support package on Tuesday for homeowners & businesses affected by the economic impacts of the Covid-19 virus.
- $6.25 billion business finance guarantee scheme
- 6-month principal & interest payment holiday
- Detail not yet finished
- Banks’ core funding ratios cut from 75% to 50% (the minimum share of their funding required to come from retail deposits, long-term wholesale funding &/or capital).
The package will include a 6-month principal & interest payment holiday for mortgage holders & small/medium enterprise customers whose incomes have been affected by the economic disruption.
The Government & the banks will implement a $6.25 billion business finance guarantee scheme for small & medium-sized businesses, to protect jobs and support the economy.
Mr Robertson said the specific details of this initiative were still being finalised & agreed, but the banks would make details public in the coming days.
The Reserve Bank has agreed to help banks put this in place with appropriate capital rules. It’s also decided to reduce banks’ ‘core funding ratios’ from 75% to 50% to further help them to make credit available.
The business finance guarantee scheme will provide short-term credit to cushion the financial distress on solvent small & medium-sized firms.
Mr Robertson said this scheme would leverage the Crown’s financial strength, allowing banks to lend to ease the financial stress on solvent firms.
The loan limit will be $500,000/loan and the scheme will be available to firms with a turnover of between $250,000 & $80 million/year. The loans will be for a maximum of 3 years and Mr Robertson expects the banks to provide them at competitive, transparent rates.
The Government will carry 80% of the credit risk, the banks 20%.
Reserve Bank governor Adrian Orr said: “Banks remain well capitalised & liquid. They also remain highly connected to New Zealand’s business sector & almost every household in New Zealand. Their ability to extend credit to firms to bridge the difficult times created by Covid-19 is critical and made more possible with today’s announcements. We will monitor banks’ behaviour over coming months to assess the effectiveness of the risk-sharing scheme.”
Mr Robertson said the Government, Reserve Bank & Treasury continued to work on further tailor-made support for larger, more complex businesses.
Attribution: Finance Minister.