3 see e. g. cpmi ( 2017 ), “ distributed ledger technology in payment, clearing and settlement ”, february, and cpmi ( 2018 ), “ cross - border retail payments ”, february. 4 see also cœure, b. and j. loh ( 2018 ), “ bitcoin not the answer to a cashless society ”, opinion piece in the financial times, 12 march. 5 see cpmi and markets committee ( 2018 ), “ central bank digital currencies ”, march. 6 see european commission ( 2018 ), “ fintech action plan : for a more competitive and innovative european financial sector ”, 8 march. 7 see ecb and bank of japan ( 2017 ), “ payment systems : liquidity saving mechanisms in a distributed ledger environment ”, a joint research project of the european central bank and the bank of japan – stella, september. 8 see cœure, b. ( 2018 ), “ a euro cyber resilience board for pan - european financial infrastructures ”, introductory remarks at the first meeting of the euro cyber resilience board for pan - european financial infrastructures, frankfurt, 9 march. 3 / 3 bis central bankers'speeches

consequence, the losses which both banks and corporates sustained were often huge, threatening many of them with insolvency and collapse. ( indeed, the losses were magnified because, with sharply increased liabilities expressed in local currencies, borrowers rushed to sell assets, which tended to push down asset prices sharply as well. ) these large losses in turn tended to further reduce investor confidence, and accelerate the capital outflow. by contrast, much of the foreign capital inflow into new zealand has been either in the form of equity investments, with no currency risk borne by the company receiving the capital, or in the form of new zealand dollar borrowings, by government and banks. the quarterly disclosure statements published by new zealand banks show that they have little in the way of unhedged foreign exchange positions and, although i do not have detailed information on which to make a dogmatic assertion, i would be fairly confident that the unhedged foreign exchange liabilities of new zealand corporates are very small. they have been operating for too long in a freely floating exchange rate environment to be unaware of the risks, and indeed some still recall the losses they sustained by borrowing in low interest foreign currencies in the 1970s and 1980s when the new zealand dollar itself was pegged. a third point to note is that, if a capital outflow did occur, interest rates would rise sharply as a result and it is very likely that the combination of sharply lower exchange rate and markedly higher interest rates would quite quickly reduce the current account deficit. the reserve bank might well be blamed for the sharp rise in interest rates, and to be sure we would not be at all opposed to such an increase since if the exchange rate fell sharply a marked increase in interest rates would be needed to keep inflation under control. but it is also true that, unless the bank moved to pump money into the economy aggressively, any sharp outflow of capital, whether owned by foreigners or owned by new zealanders, would necessarily result in a sharp increase in interest rates, since those selling new zealand securities and other assets would be forced to increase the yields offered on those assets in order to encourage others to buy them. in other words, with a floating exchange rate, investors ( whether foreign or local ) wishing to sell out of new zealand assets or the new zealand dollar need to find private sector buyers to sell to. the central bank is not going to be supporting the price of the new zealand dollar, or of new zealand bonds,