and disintermediation risks. moreover, we are not aware of any instances where lvr restrictions have been applied to sectors other than housing. accounting - based tools expected loss provisioning expected loss provisioning is a return to the more forward - looking ( and less pro - cyclical ) standards of the 1990s, where general provisions may be based on the expected loss over the life of a portfolio of loans, rather than current loss experience. the two international accounting boards – the iasb and the fasb – have each published proposed models for expected loss accounting and the two boards have since been working to align these proposals. a return to a system of expected loss provisioning in due course can be expected to play its part in contributing to a less pro - cyclical financial system. liquidity tools core funding ratio the core funding ratio is a tool that can help promote greater financial system resilience by requiring banks to fund credit using more stable sources than they might choose in the absence of the requirement. this discipline is particularly desirable during periods of rapid credit growth, when recourse to relatively cheap short - term wholesale funding rather than more stable longer term funding is more likely. bis central bankers ’ speeches as a tool to actively lean against excessive credit growth, our simulations suggest that the core funding ratio could, in some circumstances, play a useful supplementary stabilising role by requiring banks to always maintain a proportion of core funding which is typically more expensive than shorter - term wholesale funding. alternatively, the core funding ratio could be used as a counter - cyclical policy tool. although the core funding ratio could be a less effective anchor on credit growth during a global boom ( when funding spreads become compressed ), it would still be effective in its primary role of ensuring that banks resort to more stable funding sources. capital - based tools countercyclical capital buffers a countercyclical capital buffer is a further potential tool for building resilience in the face of excessive credit growth, which could be very beneficial during the subsequent downswing. it has also been suggested that these buffers might help to dampen the credit cycle directly. however, our calculations suggest it would have only a small dampening effect on the upswing of the credit cycle through its effect on the cost of funds ( unless one makes extreme assumptions about the size of the counter cyclical buffer or the market cost of capital ). sectoral risk - weight adjustments sectoral risk weights could be adjusted to boost capital requirements for lending to

national bank chief executive ’ s employment contract be between that person and the board of the national bank, and that any amendments to the national bank ’ s constitution have our consent. the intent of these measures is to ensure that there is coherence in the national bank ’ s local accountability arrangements and that the local board remains in a strong position to exercise independent and meaningful governance of the management of the national bank, in the best interests of the national bank, in good times and in bad. this requirement should be seen as a means of reinforcing our emphasis on the role of directors in overseeing a bank ’ s operations, and our ability to manage a crisis involving the failure of any large bank in new zealand. third, we require all prospective appointments of directors or senior executives to the anz or the national bank to be advised to us and the appointments made only if we have no objection. this measure ensures that the appointment process is in line with our new obligation introduced by the rbnz amendment act to have regard to the suitability for their positions of directors and senior managers of registered banks. generally speaking we would be unlikely to object to an appointment unless there were strong reasons to believe the individual would be unsuitable for a position of responsibility over a registered bank. finally, we require that each registered bank in the anz group maintain a level of capital in line with our current policy on capital adequacy for consolidated banking groups. this tightens up the capital adequacy rules a little in this case, to account for the fact that the anz group now contains two systemically important registered banks. we regard it as important that each of these banks maintain adequate capital on a solo basis. we took these steps in pursuit of our statutory obligations to promote the maintenance of a sound and efficient financial system in new zealand, and to avoid significant damage to the financial system that could result from the failure of a registered bank. we don ’ t think the conditions will make a great difference to the current day - to - day running of the national bank ’ s operations under normal circumstances. however, we do see them as important in bolstering our ability to deal with a crisis situation involving the bank or the anz group. we sought to impose the conditions in a manner consistent with our general approach to banking regulation, which is not to get into the business of managing banks, but to put the onus for effective bank management on the shoulders of those bestplaced to carry that task - the