WELLINGTON (AFP) — New Zealand's central bank chief reassured jittery investors Wednesday, saying the country's banking system remained sound amid the chaos in the United States.
Local shares bounced back strongly on Wednesday, more than making up their three percent losses from the previous day, amid optimism the US Congress would pass a revised 700-billion-dollar rescue package for the stricken US financial sector.
Reserve Bank of New Zealand Governor Alan Bollard said there were no major short-term effects on the New Zealand market flowing from the US crisis.
"The banking system is sound in New Zealand, and we do not expect this to alter," Bollard said in a statement.
The central bank introduced measures over the last year to make it easier for the financial market to maintain liquidity during international disruption, he added.
"While we believe these are sufficient, we are keeping liquidity support arrangements under review and will respond as appropriate," Bollard said.
"The failure of the US Congress to agree the bailout package was a disappointment, and it leaves parts of the financial markets in limbo until the matter is resolved," Bollard said.
Economists said New Zealand's banks were less exposed to risky loans than their US and European counterparts. Much of the riskier lending in New Zealand during the housing boom earlier this decade was by non-bank lenders known as finance companies.
About half of the 49 finance companies that were operating in New Zealand two years ago have collapsed or suspended repayments to depositors, with about 3.5 billion dollars (2.3 billion US) of investors' money lost or at risk.
The recovery of US share markets overnight on optimism of a revised rescue package was reflected in New Zealand on Wednesday.
After falling 3.08 percent Tuesday, the key NZX-50 index more than made up the lost ground by early Wednesday afternoon, adding 102.25 points, or 3.31 percent, to 3,192.47.
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