Macro-prudential policy in New Zealand will be relied on for a while yet as it is "valuable in addressing financial stability risks", Graeme Wheeler, governor of the Reserve Bank of New Zealand, said yesterday.In a long reflection on his five year term as a central bank chief, Wheeler positioned the less than four year old use of macro-prudential tools as effective."Experience in several countries indicates that (conventional) monetary policy is generally not a good vehicle for leaning against inflated asset prices," he pointed out."In these situations interest rates would have to increase very substantially in order to dampen asset prices and the rise in interest rates could do substantial damage to the economy by depressing spending, reducing risk taking, and undermining the competitiveness of the tradables sector."Prudential and macro-prudential policies can play a valuable role in reducing the systemic risks to the banking system associated with inflated asset markets."We are likely to see macro-prudential instruments become even more important and widely deployed by countries in years to come."In New Zealand's case he argued that loan-to-value ratio restrictions dating from late 2013 "reduced the systemic risk to the banking system flowing from the rapid increase in house prices."When LVRs were introduced in October 2013, 21 percent of the stock of mortgage lending across the banking system was at LVRs of 80 percent or higher. ... As a result of the LVR restrictions, the stock of highly leveraged loans across the banks' mortgage portfolios is now around eight per cent."LVR lending limits, he said, "are not expected to be a permanent measure."The conditions for their removal would be, Wheeler said, "signs that financial stability risks have eased; and a degree of confidence that these risks won't worsen again when LVRs are removed."