to the appointment, remuneration and removal of the deputy governors ). the governor may delegate decision making authority to other officers of the bank. ii ) the bank ’ s span of responsibilities the reserve bank is a full service central bank and its responsibilities are broader than most other central banks. not all central banks are responsible for prudential and regulatory oversight of the banking and payment systems, or have the authority to undertake exchange rate intervention. in addition, the bank has an extensive programme of financial stabilityrelated initiatives underway that includes open bank resolution, the introduction of macroprudential instruments, a review of the payments system, and implementation of basel iii capital requirements. the bank has also taken on responsibilities for anti - money laundering and regulation of insurance companies and non - bank deposit takers. bis central bankers ’ speeches iii ) important checks and balances the checks and balances and accountability mechanisms relating to the bank are considerable and include : • publication of an annual report, at least two monetary policy statements ( we do four ), and two semi - annual financial stability reports. the bank ’ s reports are reviewed by parliament ’ s finance and expenditure committee, the board of directors of the reserve bank, and the bank provides press conferences around each monetary policy statement and financial stability report. • external auditing of the bank ’ s financial reporting, oversight by the audit committee of the reserve bank board, and a strong in - house internal auditing function that reports to the governor and works closely with the board ’ s audit committee. • publication of regulatory impact assessments of any prudential policy that it adopts. • monitoring and oversight by the board of directors of the reserve bank, which acts as agent to the minister of finance in reviewing how well the bank meets its legislative responsibilities. the board reviews the bank ’ s performance under the pta, and its efforts to promote the maintenance of a sound and efficient financial system. in considering the bank ’ s monetary policy decisions, the directors receive all of the papers discussed by the bank ’ s monetary policy committee, the written advice that the governor receives from individual members of the monetary policy committee, and webcasts of the governor ’ s press conferences. the board meets nine times a year ( four times a year outside of wellington where receptions are held with the business community ) and provides advice to the governor on various management issues. the board assesses the bank ’ s performance in meeting its obligations and responsibilities, discusses this with the minister of finance, and

example, in a recent international study of housing affordability, median new zealand house prices ( relative to disposable incomes ) were the third highest amongst comparable countries. 3 the more that house prices continue to overshoot their long - run sustainable levels, the greater the prospect of an eventual significant downward correction. we have seen in those countries most affected by the gfc the significant damage that can result from sharp declines in house prices, both in terms of financial system losses and the economic stresses placed on borrowers. the impact of such an adjustment could be worsened by existing economic headwinds in the form of an overvalued exchange rate, drought affected agriculture and the government ’ s significant fiscal consolidation. we are not the only ones concerned. this view of increasing housing risk in the new zealand financial system is shared by the international monetary fund in their recent “ article iv ” assessment4 and was voiced during the recent oecd mission to new zealand. it is also shared by moody ’ s and standard and poor ’ s in their most recent risk assessments of the new zealand banking system. what can be done to reduce the imbalances? an important medium - to long - term policy response is to work on alleviating the housing supply constraints, particularly in auckland. that means freeing up land for subdivisions and also reducing the time and cost barriers faced by developers. as recommended by the productivity commission, there is also a need to promote / facilitate productivity improvements in the building sector itself, in order to bring unit costs more into line with international norms. the government is working on measures to address many of these supply constraints, but we know it could take many years to correct the supply / demand imbalances through supply measures alone. 5 for example, recent motu research on a regional housing model for new zealand concludes : “ the over - arching conclusion across all simulations is that housing markets are very slow to adjust to disequilibria, such that exogenous shocks have very long lasting effects on prices and the housing stock. ” ( grimes et al, 2013 ) 6 in the short - to medium - term, we want to ensure that the banking system is adequately capitalised for the risks associated with mortgage lending and also avoid demand pressures that could exacerbate a house price overshoot that is in no - one ’ s best interest. a continued escalation of house prices would frustrate first - home buyers ; it would risk drawing more investors into the market which