assessments, conservative collateral valuations, continuous monitoring of the borrower ’ s risk profile, and rapid reactions to changing circumstances. addressing risks – risk management and banking supervision the market environment i just described undoubtedly calls for effective risk management in order to curb potential excess. however, with regard to leveraged finance, risk managers find it difficult to appropriately and effectively play their role in a market environment characterised by fierce competition. more specifically, there are three areas where we are currently pushing for improvement. first, with regard to procedure, historical credit norms are beginning to weaken and more market - friendly structures have been adopted – i already mentioned the covenant - lite issue. in that regard, the thorniest aspect is the credit approval process. the speed of credit approval has become a cornerstone of competitiveness in the market for leveraged finance. in order to increase their market share, banks have significantly shortened their internal validation process. anecdotal evidence suggests that many deals are presented by the borrowers as “ take it or leave it ”. in some cases, potential borrowers requested approval within 48 hours. to me, it seems rather challenging to properly understand a deal within 48 hours – both for the front office as well as for risk management. second, with regard to limits, risk managers need to be alert regarding a shift towards structures that support an expanding business. most banks have limits in place with regard to exposures held on their own books. however, these limits have sometimes been shifted upwards to accommodate business needs and the prospect of rewarding transactions ; the underwriting limit, for instance, has on average increased by 49 % between 2012 and 2014. in such circumstances, risk managers should ensure that stress tests adequately reflect the higher limits. in any case, from a supervisor ’ s perspective, large underwriters could be expected to avoid too much fluctuation in their limits. third, with regard to stress testing, all banks should conduct dedicated stress tests for their leveraged finance portfolios – i mentioned that before. such stress tests are helpful in identifying the consequences of downturns in the markets. therefore, as part of our planned supervisory actions, stress - testing frameworks will be strengthened, particularly with regard to the underwriting pipeline. to sum up : the european market for leveraged finance has grown, and european banks have increased their exposure to it. we as supervisors are closely monitoring these developments. but we go beyond mere observation ; we are also acting, combining individual and ssm - wide

monetary policy statement projections are for annual cpi inflation to trough around 1½ percent in the september 2009 quarter, before lifting slightly above 2 percent thereafter. headline cpi and inflation expectations ( annual ) source : statistics new zealand, rbnz estimates. we need to see inflationary pressures reducing significantly across the board, if we are to keep on easing monetary policy, thus helping the new zealand economy to recover. that depends on all sectors of the economy responding to the reduced demand and not adding inflationary pressures to the system. some examples : we would hope that the electricity industry does not take advantage of its market position and keep increasing rates, that local authorities realise they need to set rates increases below inflation for a change, that the construction materials industry respond to much weaker demand, that the food industry react to lower international commodity prices with price cuts, that petrol companies keep cutting forecourt prices, that the transport industry pass on fuel price cuts, and that the banks pass on interest rate cuts. only then will all these firms be playing their proper role in new zealand ’ s recovery.