With the current risk that global funding conditions could turn adverse very suddenly and our banking system’s dependence on offshore wholesale funding, in New Zealand we have placed priority on strengthening liquidity standards even before increasing capital ratios. 3.
The third channel that we might expect to play an enhanced role in a credit-constrained world is public finance. Public financial intermediaries are active in such areas as lending to small and medium-sized enterprises and trade finance, and these demands could rise in the years ahead.