The crisis and the Reserve Bank’s stabilisation role

The global financial crisis and subsequent recession have highlighted the huge costs that financial imbalances can impose on an economy. Because the financial crisis was in large part the result of specific vulnerabilities in the banking sector, reform proposals are accordingly focused on improving the resilience of the global financial system by ensuring that financial institutions’ risk management adequately takes account of systemic risks. While our banks have emerged relatively unscathed from the crisis, New Zealand has suffered a long recession. This article discusses these debates in both the global and New Zealand context.