welfare. this is true whether the financial system is largely composed of domestic banks or dominated by foreign banks. and it is critical in a small, open, indebted, economy, such as new zealand ’ s, given the potential vulnerability to international sentiment and cross - border capital flows. in the absence of any fair and formalised, operationally and legally robust, trans - national regulatory framework, the financial stability buck stops at national laws and the supervisor ’ s and central bank ’ s duties under those laws. the financial stability stakes are too high to pass on such a responsibility lightly. in banking, while the home and host authorities have some complementary interests, they also have areas of potentially diverging and conflicting interests, as well as jurisdictional limits. the reserve bank of new zealand is committed to doing all it can to maintain a sound and efficient financial system in new zealand. we believe that it is essential to maintain the frameworks needed to fulfil our responsibilities. this includes a clear legal and practical basis to supervise the financial system and the capacity to respond to a financial crisis effectively on a stand - alone basis if necessary. equally, we must have a clear legal basis for providing liquidity support when required, on the basis of bank balance sheets and capital positions that are as meaningful and clear as they can be in the circumstances. but, we also recognise the benefits of mutual recognition and harmonisation of regulatory policies where sensible, and the benefits of cooperation and coordination between the home and host supervisory authorities. the efficiency and effectiveness of our banking supervision will be greater, and the crisis management options wider, the closer the home and host authorities are. the reserve bank of new zealand is committed to remaining a welcoming, albeit responsible, host. however, the regulatory risks and rewards have never been greater.

enable risk assessment and mitigation, and incentivise investment in emission reduction and adaptation. disclosure does this by subtly changing the rules to the game — without changing the game. firms ’ behaviour will change by directing attention to climate - related risks – ‘ you manage 3 niwa ( 2019 ) coastal flooding exposure under future sea - level rise for new zealand. accessed at https : / / www. deepsouthchallenge. co. nz / projects / national - flood - risks - climate - change. a second study, of modelling flooding from rainfall and rivers, estimated that around 411, 000 were currently exposed along with 20 airports and 3400km of electricity transmission lines. niwa ( 2019 ). new zealand fluvial and pluvial flood exposure. accessed at https : / / www. deepsouthchallenge. co. nz / projects / national - floodrisks - climate - change what you measure ’. while investors ’ behaviour will change as they see both climate risks and opportunities. even then leadership will still be needed. our survey of new zealand insurers and banks last year found broad concern that climate change exposed the financial system to significant risk. but, we disappointingly found scant evidence that the climate risk concerns are influencing daily business decisions. the lack of action may relate to the partial awareness. only 60 percent of surveyed banks and one third of insurers disclose some climate - related information. 4 this creates inconsistent information and comparability, leading to uninformed decisions. hence, we support the mandatory disclosure of climate risk, especially one that is collaborative in approach with industry. there are important challenges to making disclosure effective in meeting new zealand ’ s carbon reduction objectives - including standardised measures and climate scenarios, and sound data management and interpretation. we need to get this right. recently we stepped up our supervisory engagement on the identification and management of climate risks amongst new zealand financial institutions. we also lead the council of financial regulators ’ work on the climate challenge, including helping to develop a shared programme to train regulators in climate risk disclosure. we do so with haste because any delay in disclosing climate risk increases the likelihood of a disruptive step change to our economic prosperity and social cohesion. disclosure plays a key role in ensuring a smooth transition to a low carbon emission future. we encourage those banks and insurers who don ’ t already disclose climate - related information to hurry up and do so. you need to support our collective objective