Last year the sight of anxious Brits queueing at Northern Rock branches in a desperate bid to recover their savings sent shockwaves around a financial world already reeling from the sub-prime and credit crisis.

The safety of money New Zealanders have in their bank accounts, and to lesser extent the wealth they have accumulated in their homes, are a couple of things they have probably taken for granted in recent years.

Softening prices, however, will probably have forced many of us to rethink housing as our primary means of building up wealth and the failure of Northern Rock raises the spectre of a far more damaging economic catastrophe.

Aruguably, the prospect of futher bank failures overseas and by extension here in New Zealand - where more than 90 per cent of the banking system is owned by foreigners - is more likely than it has been for years.

Northern Rock is not the only recent bank failure in developed economies.

In the United States four banks have failed in the last 12 months and Federal Reserve chairman Ben Bernanke recently unnerved financial markets when he predicted his country's economic downturn meant more would likely follow.

"Banks on occasion do get into trouble, and probably more often than is commonly thought," Reserve Bank Governor Alan Bollard pointed out a few years ago, in what were happier, safer times.

There have been several crises over the past 30 years. National Australia Bank, the owner of the Bank of New Zealand, got the wobbles in 2004 following a A$360 million ($416 million) foreign exchange trading scandal, and in the late 1980s and early 1990s both the State Bank of Victoria and the State Bank of South Australia failed.

Westpac found itself in a "parlous condition" as a result of exposure to commercial property investment firms. In New Zealand the Government was forced to bail out the BNZ in 1990.

The early 90s also saw systemic banking collapses in Sweden, Finland and Norway and the Asian financial crisis in the late 90s resulted in Indonesian, Korean and Thai banks all needing financial rescue.

The disruptive upheavals currently playing out in global financial markets come hard on the heels of - and indeed are inextricably linked to - a period of unprecedented growth in the amount of debt taken on by households and businesses across developed economies in the last five years which has now topped out.

"Banking pressures are often linked to the upper turning points of business cycles," says Susan Schroeder, senior lecturer in business and economics at Auckland University of Technology.

"Given the close relationship that New Zealand banks have with the Australian banking system, a key risk to New Zealand's banks is for the Australian economy to reach the peak, or upper turning point, in its
business cycle." Schroeder points out that the Australian economy is still healthy, but the word recession is being nervously mentioned with increasing frequency.