zealanders, but these banks also it is also useful to recall that in 1989, the development finance corporation, which was new zealand ’ s seventh largest financial institution at the time ( but not a bank ), was placed into statutory management and ultimately liquidated. new zealand also suffered from widespread finance company failures in the mid - late 2000s, devastating the savings of many new zealanders and damaging confidence in the financial system. 4 under the reserve bank of new zealand act, the governor general, on the advice of the minister of finance, may appoint a statutory manager to carry out the resolution of a registered bank. the reserve bank can also issue directions to the statutory manager. 5 the review of the reserve bank act is considering whether increased protection of deposits, perhaps through a deposit insurance framework, would be beneficial. provide the vast majority of financing for individuals and businesses in new zealand. and because bank failures, and even ‘ near failures ’, usually result in significant credit tightening ( as banks begin to strengthen their balance sheet by restricting credit to only the most creditworthy borrowers ), it could be expected that some new zealanders and new zealand businesses would not have access to the same level of credit as before. this could mean that it may be more difficult for individuals to borrow to buy a car or home or pursue further education, and businesses may have trouble borrowing to meet their short - term cash flow needs. the decrease in available credit could have disastrous impacts on new zealand ’ s economy. while it is likely that the reserve bank would intervene to resolve a failing bank before it is in a negative capital position ( i. e., the reserve bank would begin the resolution process when the value of assets exceeds liabilities ), it is difficult to determine exactly how the bank ’ s remaining value ( and losses ) would be allocated among creditors ( including depositors ) and shareholders. however, what is known with greater certainty is that creditors ( including depositors ) will realise more value in the failed bank if the bank has a greater proportion of shareholder capital. social costs of bank failures international agencies like the world bank, the world health organization, and the united nations have investigated the economic and social impacts of financial crises. they report that banking crises almost always lead to a general downturn in the economy, associated with rising unemployment and lost output, with consequential societal effects. 6 these impacts go beyond the financial realm as they affect the health and quality of life, often of people who had little involvement in

timelines and the costs of the existing insolvency proceedings. conclusion to sum up, our duty, as economic and supervisory authorities, is to continue our close monitoring of financial institutions and markets, to ensure that they continue to provide the necessary flow of credit to the economy, and of financial stability risks stemming from this crisis. we must continue to adopt measures to mitigate those risks and, naturally, stand ready to provide an appropriate european response should such risks materialise. thank you for your attention.