on a distributed ledger technology ( dlt ) or comparable cryptographic technology. and the third “ new ” fact, at least from a long - term perspective, relates to the role of central banks in setting monetary policy, and more recently to the emergence of negative rates as a policy instrument and the consequences for the transmission of monetary policy. i would argue that, in most countries, the first fact – the disappearance of cash – is not a cause for imminent action. you can see this on my first slide. demand for banknotes is still growing around the world, and in the euro area cash remains a popular means of payment. 2 / 14 bis central bankers'speeches the second fact is the subject of the first report that will be presented tomorrow : distributed ledger technologies. universal reserves could be implemented in principle either as central bank deposits – this was tobin ’ s original idea of “ deposited currency accounts ” – or as dlt - based digital tokens. digital tokens – call them “ fedcoin ”, “ ecbcoin ” or why not “ biscoin ” – are different in two main ways. first, they would save the central bank the operational risks and costs related to administering individual central bank accounts for millions of households and companies. second, they may share one of the key features of cash, namely that the identity of the holders would – at least in principle – not be known to the central bank. 8 however, the technology is still immature, costly to maintain and possibly prone to vulnerabilities. existing retail payment systems, on the other hand, are convenient, efficient and reliable and have earned public trust. today they may be slower and costlier than schemes based on crypto assets, but with the introduction of 24 / 7 instant payments in many jurisdictions – and assuming that similar efforts can be made to improve the cost, timeliness and transparency of crossborder payments9 – they appear to still be superior to what we have seen from crypto assets thus far. the same holds true, for the moment, for wholesale payment systems, even if distributed ledgers show more promising applications in that area. 10 that being said, developing economies ’ successful experience with mobile payment systems suggests that cash may be sidelined sooner rather than later, even in economies where it today reigns supreme. 11 indeed, our own efforts to upgrade retail payment systems may even be accelerating this evolution. 12 in a not so distant future, universal reserves could enable people to hold a central bank liability

dominance of residential property as the banking system ’ s single largest sectoral exposure underpins the reserve bank ’ s prudential focus on housing lending risk. we pay considerable attention to the housing risk models used to determine banks ’ capital requirements and have generally adopted a conservative approach, with higher risk weights relative to international norms. consistent with this approach, we are currently reviewing the scale of housing risk weights in relation to loan - to - value ratios. we are also focussing on the additional housing - related systemic risk that might arise from credit cycles in our new macro - prudential policy regime that is currently out for public consultation. while as yet untested in new zealand, such policies are deployed in canada, switzerland, sweden and hong kong, for example. macro - prudential policies draw on existing prudential tools to limit financial system risk arising from excessive credit and asset price movements. practically, this means that additional prudential requirements may be applied for a period during credit up - cycles and then removed during down - cycles. the tools operate directly to improve the resilience of bank balance sheets and indirectly to moderate the extremes of the credit cycle. sources of pressure in today ’ s housing market we are again facing a strong housing market with median house prices having risen by 8 percent over the past year. so far, the nature of the current market is different to the boom of 2003 – 07. as seen in figure 2, the current house price pressures are concentrated in auckland and christchurch. house price inflation in the rest of the country is less pronounced, around 4 percent over the past 12 months, although there is considerable variation among districts. figure 2 : house price inflation by region ( annual percent change ) source : reinz, rbnz estimates. supply constraints in canterbury and auckland and pent up demand from first - home buyers are important factors. there is an element of investor demand and of new foreign buyers entering the market in auckland, but these factors – at least as yet – are not as influential as they were back in 2003 – 07. the relevance of housing supply constraints has been discussed in earlier reserve bank / treasury reports and, most recently, in the productivity commission ’ s report on bis central bankers ’ speeches housing affordability. 2 contributing to the current national housing shortage has been the low level of residential construction activity in recent years. from 2007 to 2011, residential investment as a share of gdp fell by 2 - and - a - half percentage points. in christchurch,