On Tuesday 24 March, Government, retail banks and the Reserve Bank announced a major financial support package for homeowners and businesses affected by the economic impacts of Covid-19.

The package will include a six-month principal and interest payment holiday for mortgage holders and SME customers whose incomes have been affected by the economic disruption from Covid-19.

The Government and the banks will implement a $6.25 billion Business Finance Guarantee Scheme for solvent small and medium-sized businesses, to protect jobs and support the economy through this unprecedented time.

The Reserve Bank has agreed to help banks put this in place with appropriate capital rules. In addition, it has decided to reduce banks ‘core funding ratios‘ from 75% to 50%, further helping banks to make credit available. The Government will carry 80% of the credit risk, with the other 20% to be carried by the banks.

The scheme will include a limit of $500,000 per loan and will apply to firms with a turnover of between $250,000 and $80 million per annum. The loans will be for a maximum of three years and are expected to be provided by the banks at competitive, transparent rates.

Reserve Bank Governor Adrian Orr said: “Banks remain well capitalised and liquid. They also remain highly connected to New Zealand‘s business sector and almost every household in New Zealand. We will monitor banks‘ behaviour over the coming months to assess the effectiveness of the risk-sharing scheme.”

The specific details of this initiative are being finalised and agreed urgently and banks will make these public in the coming days.

“We are acting quickly to get these schemes in place to cushion the impact on New Zealanders and businesses from this global pandemic,” Finance Minister Grant Robertson said.

“The Government, Reserve Bank and the Treasury continue to work on further tailor-made support for larger, more complex businesses.”