##urers, notably in relation to sales incentives. the court judgement on cbli ’ s liquidation stated that “ aspects of cbli ’ s management had indicated a lack of commercial probity ”. and “ a lack of candour in dealing with the company ’ s auditors and the regulator ”. more recently we revoked anz ’ s accreditation to model its own operational risk capital requirement because of persistent failures in its controls and attestation process. it is clear that institutional self - discipline has been lacking. there is therefore a strong case for further increasing the intensity of our supervisory model in line with the recommendations from the imf ’ s financial sector assessment program ( fsap ) assessment of new zealand. 10 this applies even if, on paper, individual regulated entities appear to be sound. banks should expect our more intensive supervisory approach to apply even if capital requirements are increased as a result of the ongoing capital review. regulated entities can expect our supervision to be more intrusive, in seeking evidence that attestations are merited and verifying compliance, and that we will intervene and enforce our requirements. we will be more pro - active in holding directors and managers to account, particularly in areas where we have already identified shortcomings. our regulated population can expect us to continue with our thematic reviews in order to enhance self - discipline and our own understanding of risks. in the near future there will be a see https : / / www. imf. org / en / publications / cr / issues / 2017 / 05 / 08 / new - zealand - financial - sectorassessment - program - financial - system - stability - assessment - 44886 ref # 8022722 v2. 0 thematic review on banks ’ liquidity standards and another on the appointed actuary regime in the insurance sector. we will continue to periodically stress test the banking system. we are working towards more transparency about how our supervisory response would escalate if institutions come under stress. as part of the capital review we have sought feedback on the proposed supervisory consequences for banks if they breach their capital buffers. the starting principle is that our response will vary depending on the extent to which a bank needs to use its capital buffers to absorb losses. a minor breach of the proposed capital buffers would result in increased monitoring and potentially a formal request for the bank to submit a capital plan detailing how it planned to remedy the breach and by when. more significant breaches could result in increasingly restrictive supervisory actions

backed commercial paper is a somewhat different story. because this short - term paper must be redeemable at maturity, despite the longer - term assets that back it, it must carry a guarantee from a liquidity provider. so, there is a question of how liquidity providers should take into account the potential for liquidity calls to be made, both in terms of the capital they hold against this potential, and the liquidity of the assets on their balance sheet. this issue, which came to the fore this summer, represents a key challenge for the members of the iif. how do you make provisions for liquidity calls that may come against the guarantees that your institutions provide, and for the support of products that represent a reputational risk should they fail? these are not easy questions to answer, but it is important that you provide your own answers and be prepared to discuss them with your regulator in the context of the implementation of basel ii. and i am pleased to see that the iif has been working hard on these particular issues. finally, this summer's turbulence has raised a number of system - wide issues related to liquidity. in the event of a serious disruption in securities markets that would threaten financial stability, are there policies that would be helpful? the financial stability forum has been looking at this issue. and of course it is not only commercial banks that need to worry about this, it is also a problem for central banks in their role as the ultimate providers of liquidity to the banking system. over the summer, central banks have seen that their standing liquidity facilities have worked quite well with respect to the market for overnight funds. different central banks have different practices and facilities in place to provide liquidity to the banking sector. in canada, we have clear rules for accessing our standing liquidity facility to cover routine overnight liquidity needs. and we have clear rules regarding emergency lending assistance for individual solvent banks with acute liquidity problems. but are there principles that would suggest that some market failures would be best dealt with if we had a readily accessible facility that would provide liquidity to banks at terms longer than overnight, collateralized with a possibly wider range of securities? such a facility would have to allow for suitable term premiums and penalties. the types of market failure that such a facility would be designed to deal with would obviously need to be thoroughly examined and discussed, as would the pros and cons of any specific proposal, including a consideration of all other issues that might be