##fc unfolded the new zealand government introduced a guarantee scheme that covered up to $ 133 billion in deposits and investor funds. by the time the scheme was withdrawn, the crown had paid out approximately $ 2 billion to depositors for losses from failed entities. 8 system, and / or bank liquidations ) ; and ( 2 ) significant banking policy intervention measures in response to significant losses in the banking system. see ‘ systemic banking crises database : an update ’, imf working paper, by laeven and valencia, 2012. 3 output losses are calculated as deviations of actual gdp from its trend and increases in public debt is measured as the change in the public debt - to - gdp ratio over the four year period beginning with the crisis. see ‘ systemic banking crises database : an update ’, imf working paper, by laeven and valencia, 2012. 4 the costs of banking crises can vary markedly. the gross fiscal cost of the crisis in iceland – a small, open and financially integrated country like new zealand – mainly in terms of bank recapitalisations and asset purchases, was 44 % of gdp. in ireland the pre - crisis boom in construction and subsequent collapse of the local banking system, resulted in a government bail - out amounting to approximately 40 % of gdp. iceland and ireland also feature among the ten costliest banking crises in terms of overall increases in public debt – at more than 70 % of gdp within four years. see ‘ systemic banking crises database : an update ’, by laeven and valencia, 2012. 5 see ‘ seasonally adjusted standardised unemployment rates ’, central statistics office at https : / / www. cso. ie / en / statistics / labourmarket / principalstatistics / seasonallyadjustedstandardisedune mploymentratessur / 6 see ‘ health impacts of the great recession : a critical review ’, by margerison - zilko, et al., 2017. 7 world economic outlook, imf, october 2018 ; and ‘ recovery from financial crises : evidence from 100 episodes ’ by reinhart and rogoff, american economic review, 2014. 8 office of the auditor - general, 2011. serious incidents ( that could have led to a crisis ) are more common than people realise. over the years various institutions have suffered significant losses and either had to raise additional funds from the market or be supported by the government. the scale and impact of these events is much wider and greater than the

almost certainly vary from country to country. hence, we should not seek to pursue a “ once size fits all ” type of approach. taking into account these general observations, i believe the most productive focus for international and national economic reforms lies in a few key areas : • strengthening financial markets. • reducing vulnerability to short - term capital flows. • promoting greater transparency – at all levels. • involving private creditors in debt resolution arrangements. as you will note, these four areas overlap significantly with some of the issues addressed by m. trichet. let me elaborate a little on these points. strengthening financial markets. the importance of robust financial markets has been clearly demonstrated in many countries over recent years, most recently in asia. given the critical role that financial markets play in the wider economy, and the problems created when financial markets are in a weakened state, particularly in a world of mobile capital, it is essential that steps be taken to strengthen financial markets. a number of positive measures are already being taken to this end. the development of the basel core principles on banking supervision is one of these, as m. trichet has mentioned. effective banking supervision arrangements are clearly an important element in creating robust financial systems and the basel core principles have the potential to play a helpful role in assisting governments to improve their supervisory arrangements. however, i would make two cautionary points. first, it is important that the core principles do not become prescriptive, rigid templates to be applied uniformly in all countries. the optimal design of banking supervision arrangements will necessarily vary from country to country, depending on market structure, institutional arrangements and the effectiveness of market disciplines. it is important that, in advancing the core principles, governments have the leeway to depart tom the specifics of the principles where they consider it appropriate to do so. and, in assessing compliance with the core principles, it is important that emphasis is placed on the quality of policy and policy outcomes, rather than on whether there has been strict compliance with the details of the principles. this is also true for the other international standards being developed. second, it will not surprise you when i say that there are dangers in placing too much reliance on banking supervision, or in pursuing regulation with excessive vigour. banking supervision and some regulation of risk - taking are important ingredients in the policy mix, but they are not sufficient in themselves to promote financial system stability. and there are dangers in taking regulation too far – we need to be sensitive to the compliance costs, regulatory distortion