"Despite progress in reshaping regulatory frameworks, financial systems in many countries remain under stress due to an overhang of private and public debt."
He said markets have been especially concerned about the sovereign debt situation in Greece and the possibility of problems spreading to other European countries, and that this had made access to offshore debt harder for New Zealand banks.
"In New Zealand, households and businesses have been containing debt, which has helped to reduce the country's overall external imbalance. However, these efforts have been offset, in part, by rising levels of public debt."
Deputy Bank Governor Grant Spencer said the banking system was better placed to weather the storm than at the outset of the global financial crisis in 2008, and that the bank has introduced new solvency standards for insurers.
