see another sharp rise in the exchange rate this year. you will note that i have not said much today about what i think might happen to the exchange rate in the coming year. and that is for a very good reason. however much we can understand, after the event, what has driven the exchange rate, neither economists and central bankers ( nor anyone else ) has a great track record forecasting exchange rates. and that is especially so when the exchange rate is no longer well away from sustainable long - term levels. most observers do expect some further rise in our exchange rate, mainly because the us dollar is widely expected to fall further. but a year is a long time in financial markets, and much can change over that time in investors ’ attitudes to likely returns both here and in other countries. i would emphasise in closing that the reserve bank will never be complacent about the sorts of exchange rate swings we have seen in recent years. we are limited in what we can do to prevent or moderate them, but we recognise the impact they have both on you as business people, and on consumers up and down the country. as i noted at the start of this address, if new zealand can achieve a superior long - run economic performance that will lead to a trend increase in the exchange rate, but quite marked fluctuations around that trend will be an uncomfortable fact of life for us all. while keeping the goal of medium - term price stability constantly in view, the reserve bank will always be asking whether, and how, our decisions and comments can best avoid undue and unnecessary volatility in the economic environment we face - not just today, but over the full course of the economic cycle. the fact that some volatility is inevitable is no excuse for simply being oblivious to it. you cannot be, and we are not either.

banking supervision has been instrumental in producing a number of important international standards on the supervision of banks, including the capital accord and minimum standards governing the supervision of banks ’ cross - border establishments. similarly, other supervisors such as iosco and the international association of insurance supervisors have pursued co - operation in their areas of responsibility. and in the early 1990s, in recognition of the emergence and growth of financial conglomerates, banking, securities and insurance supervisors from g10 countries began to work together to identify the problems that conglomerates can cause, and to consider ways to overcome them. the mexican crisis in 1995, in particular, and the widespread incidence and high cost of banking problems recently in this region have prompted calls for concerted international action to promote the soundness of financial systems. these calls have strengthened over the last couple of years, with the g7 countries calling for the adoption of strong prudential standards in emerging countries and encouraging the international financial institutions to increase their efforts to promote effective supervisory structures in those countries. the basel committee has been at the forefront of this effort with the release of the core principles. the imf and the world bank are also involved. the imf is making evaluation of financial supervision and regulation part of its annual country reviews, and the world bank is emphasising the strengthening of financial infrastructure as an important part of its structural assistance programmes. these initiatives have many positive aspects. international harmonisation and co - operation are very important in what is rapidly becoming a “ borderless ” global financial system. also, it is important that the risks that supervisors should take into account in their supervision are identified, and that benchmarks are established whereby countries can measure their progress in establishing appropriate supervisory regimes. as supervisors, we can derive a great deal of benefit from such an approach. bank customers and banks themselves also benefit from the international comparability made possible by the use of common measurement and disclosure frameworks. nevertheless, i believe it is important not to assume that supervisory arrangements should be, or can be, the same in every country. in my view, they must be tailored to the individual circumstances of each country. what is appropriate for a small country like new zealand may be totally inappropriate for a large country like the united states, and vice versa. to give just one example, non - bank financial institutions need not be licensed or supervised in order to take deposits in new zealand. here that does not cause any problems because the non - bank sector is tiny relative to the bank sector, and people