Chapter 3: Deepening financial markets.

New Zealand's financial markets are relatively small by OECD standards, and dominated by the banking sector, although there are no obvious regulatory barriers impeding financial market development. The country has accessed international capital markets for many years to finance investment, although in recent years the banks have channelled a significant share of foreign capital inflows into mortgage lending. Domestic bond market liquidity has been hampered by the twin developments of shrinking public debt and the Approved Issuer Levy that discourages domestic corporate bond issues. Fostering the development of deeper bond financial markets would provide a wider range of options for managing risks as well as for raising capital. However, there is little evidence that NZ businesses are systematically constrained by lack of access to finance and the small corporate bond market may partly reflect the small share of large private-sector enterprises. Some improvements could be made to enhance the environment for savings instruments. The governance structure for collective investment schemes needs to be strengthened and a more rigorous approach to disclosure requirements for fees and expenses would enhance transparency and comparability. Efforts to improve financial literacy and plans to integrate financial education into the school curriculum are welcome. [ABSTRACT FROM AUTHOR]