##s, moral hazard risks and potential impediments to financial innovation that can result from excessive or poorly designed regulation. the essential partnership to banking supervision is the role market discipline can play in creating the right incentives for the sound management of banking risks. i believe that many governments have tended to under - estimate the importance of market discipline and that some government interventions have reduced the effectiveness of this discipline – to the detriment of banking system soundness. i would therefore urge policy - makers to take steps to strengthen market discipline in their economies. this ran be done in a number of ways. an important step in this process is increasing the quality and frequency of disclosure made by financial institutions and strengthening the accountability of bank management and directors. in this regard, international initiatives to improve corporate governance and to strengthen financial disclosure and auditing arrangements are welcome developments. a number of other measures can also be taken to strengthen financial markets – although some of these are not without controversy and do require political commitment. possibilities include privatising or improving the governance arrangements for government - owned banks, improving the contestability of financial systems and, importantly, ensuring that financial safety nets and the strategies for addressing bank failures do not shield creditors from any possibility of loss. reducing vulnerability to short - term capital flows. short - term capital flows clearly played a major role in the asian crisis. in some cases, large capital inflows contributed to an overheating of asset markets and an excessive growth in credit while shifts in market sentiment resulted in rapid capital outflows, with severe consequences for currency stability, liquidity and financial system soundness. it is obviously important that steps be taken to reduce the vulnerability of economies to the volatility of short - term capital flows, to the extent possible. we live in a world of increasing capital mobility and i think we would all agree that the benefits this brings outweigh the costs. in particular, international mobility of capital strengthens the disciplines on policy - makers to maintain sound and credible policies, improves the efficiency of resource allocation and assists in economic development. turning the clock back to a world of closed capital accounts is neither feasible nor desirable. but i think a number of measures can be taken to reduce the risks associated with short - term capital volatility. • adopting and maintaining sound, sustainable and credible macro and microeconomic policies is clearly essential. although credible policies will not eliminate the risk of sudden capital outflows, they can be expected to assist in reducing volatility by

when confronted with the covid - 19 facts, was quick to significantly ease monetary conditions i. e., lower interest rates. it was very clear that the virus posed a significant negative economic shock. the committee ’ s “ least regrets ” approach to policy meant it was better to risk doing too much too soon, than too little too late when it came to easing policy. the scale and duration of the covid - 19 economic shock was unprecedented and unknown. we were not alone in this action. globally, monetary and financial stability policy responses, and fiscal expansion policies, were quickly put to work collaboratively to provide economic support. across the oecd countries the adopted policies were all broadly similar, including some combination of : ensuring credit and cash is appropriately affordable and accessible, increased government spending and investment, support for employers to retain their employees and access credit, and enhanced health and economic welfare support. all countries designed their policy responses for their local conditions, commencing with the tools that were most operationally ready to deploy. while the front - line economic response to the covid - 19 pandemic is fiscal policy, the reserve bank of new zealand provided significant assistance by ensuring interest rates were reduced to a level consistent with maintaining low and stable inflation, and contributing to maximum sustainable employment. consistent with our dual monetary policy mandate and our financial stability mandate, we acted to support economic and financial activity. our actions included : instigating a significant reduction in retail interest rates ; ensuring there was ample liquidity for the banking system ; page 6 of 17 supporting the functioning of new zealand ’ s foreign exchange and debt markets ; bolstering community access to cash ; and facilitating a variety of government and industry - led initiatives to allow the financial sector to remain customer - focused. on the latter, the reserve bank worked with the government and financial sector to implement a mortgage deferral scheme, business financing schemes, and a reprioritisation of our regulatory work to ensure banks were able to use their capital to support their customers ( figure 7 ). figure 7 : mahi tahi : working together to ensure cash - flow and confidence source : mahi tahi : working together to ensure cash - flow and confidence ( pdf 318kb ) our actions assisted the new zealand economy to remain on track to experience low and stable consumer price inflation, a lower unemployment rate than otherwise, a new zealand dollar exchange lower than otherwise, and ongoing financial stability. our debt and foreign exchange markets also performed robustly and our