The fragility in New Zealand financial markets spread to Australian-owned AMP Capital NZ on Friday. An investor run on managed funds, property trusts and finance companies has spilled over onto AMP Capital's NZ Property Fund. With withdrawals exceeding new cash inflow, the property fund dropped from NZ$505 million at the end of March to $419 million on August 1. To avert a liquidity crisis, AMP Capital froze the fund, affecting 2900 investors.
In the last fortnight, funds totalling around NZ $1 billion have been frozen in Canterbury Mortgage Trust, Guardian Mortgage Trust, Totara Mortgage Trust, and an investment fund.
Should the run on non-bank financial institutions spread and intensify, the Reserve Bank may well have to explore extending its lender of last resort facilities to non-banks as the Federal Reserve as done in the U.S.