RBNZ’s RMO high grade RMBS framework


On 12 August, the Reserve Bank of New Zealand published a summary of submissions in response to its second consultation released in November 2018.  It includes a summary of the key issues remaining with the regard to the Residential Mortgage Obligations (RMO) policy, and outlines the next steps to a conceptual framework with a simple, transparent and comparable mortgage bond standard.  

In introducing the new standard, the RBNZ aims to reduce contingency risks for the Reserve Bank as a lender of last resort, ensuring financial intermediaries supply sufficient high quality liquid assets.  

The standard also aims to provide issuers and investors with an additional funding and investment instrument, supporting the development of deeper markets. A final policy decision is expected to be published by the end of 2019. 

The RBNZ has also updated repo-eligibility conditions for RMBS in the transition to the final RMO policy. This includes a new approval process and requirement for a more detailed RMBS reporting template.

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