christian hawkesby : opening statement to finance and expenditure committee opening statement by mr christian hawkesby, deputy governor and general manager of financial stability of the reserve bank of new zealand, to the finance and expenditure committee ( fec ), wellington, 9 february 2024. * * * kia ora koutou katoa ahi ahi marie koutou e nga rangatira karanga mai, mihi mai, whakatau mai tna koutou katoa i'm christian hawkesby, deputy governor and general manager of financial stability. the governor and i are joined today by director of prudential policy kate le quesne and manager system monitoring and analysis chris mcdonald. also present with us are some of the very capable team that contributed to the november financial stability report ( fsr ), which provides our latest assessment of the resilience of the financial system, and our strategy and priorities in the face of that assessment. as we said when we released the fsr in november, our assessment is new zealand's financial system remains strong as it adjusts to a higher interest rate environment. new zealand's financial sector is strong and well placed to handle both the current adjustment to higher interest rates and other more severe economic scenarios. we remain in a global high interest, high inflation environment : while central banks globally have slowed the pace of tightening, the impact of previous interest rate increases is yet to be fully felt a weakening in global demand, particularly in china, has contributed to lower key commodity prices for new zealand, and we are monitoring developments in the middle east closely. domestically, new zealand households continue to face higher debt servicing costs. although most borrowers have been able to manage the increases by using their savings buffers and reducing their spending in other areas, we know that some people are struggling and there has been an increase in borrowers who are falling behind on mortgage payments. businesses are continuing to service their debt. although the dairy and commercial property sectors are facing challenges, partly due to higher debt servicing costs. i'll briefly provide a few updates on developments since we published the fsr in november. in january we launched a consultation on activating debt to income ( dti ) restrictions and loosening loan - to - value ratios ( lvr ) for residential lending. dti 1 / 2 bis - central bankers'speeches restrictions set limits on the amount of debt borrowers can take on relative to their income, and we see them as a complementary

##ami or the “ endless knot ”, illustrates how individuals and institutions across the world and over time are connected in a web of mutual interdependence. another valuable insight from asia is that of the four friends ( the elephant, the monkey, the rabbit, and the bird ). by standing on each other ’ s shoulders the bird is able to reach the fruit for all of them. preventing future global financial crises requires us to understand the web of mutual interdependence characterised by the endless knot, and the wisdom of the four friends. despite the invaluable data gathering and research by the bis, our understanding of the drivers and impact of cross - border financial linkages remains limited in many areas. our theoretical benchmark for much policy analysis continues to be based on capital - free arbitrage that assumes efficient and smooth changes in asset prices, with no material effect for capital flows. we have excellent speakers and papers over the next two days and an opportunity to explore many of these and other important issues. i wish you productive discussions and deliberations. certainly, my reserve bank colleagues and i will take a great deal of interest in the conference sessions. bis central bankers ’ speeches