New Zealand the world's ninth safest sovereign credit risk, according to credit rating agency Standard & Poor's

It's like this:

“Reflecting our concerns around housing sector developments, the Reserve Bank has been developing a macro-prudential policy framework. We have recently consulted on this framework and will soon be signing a memorandum of understanding with the Minister of Finance to confirm the key elements of the policy, including governance arrangements,” Mr Wheeler said.

Deputy Governor Grant Spencer said that, while housing risks are growing, banks are performing well financially and have strong balance sheets. Their capital levels comfortably meet the new Basel III requirements that took effect in January.

“Looking forward, we want to ensure that bank capital requirements adequately reflect the risks around housing lending and accordingly we are undertaking a housing capital review. In the first stage of this review the Bank is increasing the risk weights applying to high LVR housing loans for the four major banks that use their own models as a basis for calculating minimum capital requirements.

“The increase in the risk weights, applying to all current and new high LVR loans for the major banks, will result in an average increase in capital held for housing of around 12 percent and will take effect from 30 September 2013. Read statement

Then this:

Overall, banks must hold "tier one" capital amounting to at least 6 per cent of their lending exposures. Tier one capital is the most enduring kind, mainly paid-up shares and retained profits.

For example, ASB's tier one capital as of December was $4.4 billion, including $3b in shares and $1.3b in retained profits. That amount was set against lending of $35.8b to produce a tier one capital ratio of 12.2 per cent – well above the regulatory minimum.

Unfortunately, it is more complicated than that because the lending figure is "risk-weighted". ASB's actual lending to customers was $55.5b and its total credit risk was $73.4b. But not all lending is seen as equally risky. Residential mortgages secured on property are not as risky as unsecured personal loans, so mortgages are discounted in the calculation, hence the lower figure used. Read article

We need to know what happens when the estimated $35.8bn level of credit risk becomes the actual $73.4bn amount owed. Where will the safety be coming from? - the citizens, the government?