In terms of domestic lending, credit risk is mitigated by lending on a collateralised basis with banks providing RBNZ high-quality collateral, and the Bank applying discounts, with daily monitoring of collateral values and collateral calls to ensure the value of collateral is appropriate for the amount lent.
Exchange rate policy Even though increases in policy rate have succeeded in anchoring inflation expectation and helped in slowing down the domestic demand, it could not left alone to play all the burdens of economic adjustments, including in further reducing current account deficit and mitigating the spillover effects from the UMP normalization process.