Wednesday, Deputy Governor of Reserve Bank of New Zealand, Grant Spencer said the credit to households and businesses continued to grow but the rate of growth slowed significantly over the recent months. This was partly because New Zealand's banks tightened its lending criteria considerably. As a result, some businesses are reporting difficulties in procuring credit.

Spencer said, While current conditions warrant caution, it is important that the banks continue to lend to creditworthy borrowers.

The Financial Stability Report from the central bank stated that banks should maintain adequate provisions and retain capital levels sufficient to absorb unexpected losses. In its half yearly report, the central bank said provisioning is expected to increase further over the year ahead as business profits weaken and unemployment rises.

Spencer added that major government interventions have eased stresses in the international credit markets, but the adverse second-round effects of the financial crisis on global economic activity and commodity prices will take some time to play out.

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