Key issues that weighed upon the New Zealand bank and non-bank sectors last year were deleveraging the increase in regulation, and rural sector debt. These were revealed in the KPMG 2010 Financial Institutions Performance Survey of the sector. It found they were almost entirely due to an economy-wide deleveraging, the scale and duration of which has surprised many of the banks. The problem is multi-faceted and occurs at almost every level of banks' loan books. The big story this year is the development of the regulatory environment and the impact of the Financial Markets Authority, the New Zealand government's new super financial markets regulator. One market participant in the survey estimates that up to a third of its information technology budget is now spent on compliance. The costs are stifling efforts to innovate and create new products for its customers. Banks' impaired asset expenses may have improved markedly but collective provisioning actually increased in 2010.