As part of our brief to watch out for things to do with financial stability, we in the Reserve Bank have been doing some thinking recently 2 about New Zealand's dependence on foreign capital and some of the risks that that exposes us to.
In contrast to debt contracts, equity contracts feature “automatic” risk-sharing mechanisms: investors benefit from positive, upside risks but they can also lose their investments if a negative shock hits. In Europe, equity markets in general and venture capital markets in particular remain underdeveloped. Opportunities for cross-border risk-sharing are insufficiently exploited.