Karen Silk: Liquidity management- principles for liquidity provision and the end of an abundant era

Speech by Ms Karen Silk, Assistant Governor and General Manager for Economics, Financial Markets and Banking of the Reserve Bank of New Zealand, at the Commonwealth Bank of Australia (CBA) Global Markets Conference, Sydney, 22 October 2024.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
22 October 2024

Introduction

E ngā mana, e ngā reo. E ngā karanga maha o te wā.

Tēnā koutou, tēnā koutou, tēnā koutou katoa,

Good morning. It's great to be back in Sydney representing Te Pūtea Matua, the Reserve Bank of New Zealand. I want to thank CBA for hosting this event and inviting me to speak with you today.

Over the past year or so we have undertaken significant work reviewing both the composition and use of our balance sheet in delivering our objectives. In prior speeches I have addressed both the reviews of our foreign reserves' framework and our financial resources, plus the multiple roles we play in ensuring stable financial markets.

In my comments today I will focus on how we are considering the future use of our balance sheet to manage liquidity in the financial system and the principles that will inform that. We manage liquidity to support financial stability not only during periods of market dysfunction, but also to ensure the efficient settlement of payments and anchoring of short-term interest rates near the Official Cash Rate ("OCR").

There are three key messages I would like you to take away from my remarks today.

First, the Reserve Bank is resourced and ready to provide liquidity to support market functioning when necessary to meet our objectives.

Second, we will apply a principles-based approach to the provision of liquidity to financial markets. The intention of our principles is to preserve incentives for market participants to seek market-based solutions to their own liquidity needs in the first instance and not rely on the Reserve Bank as a 'lender of first resort'.