Reserve Bank Governor Alan Bollard says his darkest hour of the financial crisis was in October 2008, at the time the retail deposit guarantee scheme was set up.

In a memoir titled Crisis, co-authored with historian Sarah Gaitanos, Bollard recounts the impact of the global financial crisis on New Zealand and offers a unique insight into how and why the guarantee scheme was put in place.

By the weekend of October 11 and 12 2008, after a relentless flow of dire financial news from overseas, there were already signs of depositor nervousness in New Zealand. The Reserve Bank had to issue seven times the normal amount of $100 notes to the banks.

Starting with Ireland a number of countries had announced deposit guarantee schemes and the Australians were expected to follow suit any day.

New Zealand officials set about devising a local version, with a cap and with a risk-based fee for the institutions covered.

But the more Finance Minister Michael Cullen heard about the likely parameters of the Australian scheme the more concerned he became, Bollard recalls.

"He now wanted to introduce a more generous guarantee, as the Australian one apparently would be. He thought the scheme should have free entry ... Such a plan would be very costly and would leave the way open for entrepreneurial finance companies to undertake risky investments at taxpayers' expense."

After some debate it was decided to charge fees only on the amount of institutions' deposits above $5 billion, giving smaller institutions a free ride and angering the big banks.

Non-bank lenders had to be included in the scheme, Bollard writes. "Otherwise by Monday morning every finance company, building society and credit union in the country could have seen depositors withdrawing funds and putting them into guaranteed banks."

The Reserve Bank's directors were not impressed by the guarantee scheme. "They considered it risky, mispriced and distorting. I had to agree but argued that, more importantly, it had stopped an incipient bank run."

Finance companies that had been operating on the edge rushed to get under the scheme's umbrella.

"Our regulators had an exacting task assessing the books of each one to advise Treasury on whether they met the requirements. If we were too tough it could mean death to the company; if we were too loose it could mean a costly bailout for the taxpayer," Bollard says.

"We knew that even with the scheme it was likely that some finance companies would fail, as some had before the global crisis. We were monitoring most of these companies and, as the property market fell, some of their lending was looking very risky. We had even constructed a death watch league table."

They found that firms lending for consumer finance and industrial plant and equipment were suffering but surviving. "Those lending on property development were in chaos." It is easy to argue in retrospect that the parameters of the scheme should have been drawn differently, but Bollard is not so sure. "Could we have put in tougher entry conditions? I don't know."

Apart from some bad temper about differential pricing of the retail deposit guarantee scheme, relations between the banks and the Reserve Bank, which regulates them, improved during the crisis from their sometimes fractious state before it.

"In the lead-up to the crisis we were continually saying we were concerned about the extent of lending in those circumstances and they were saying 'Get over it'," Bollard says.

"During the crisis, when their funding markets got hit, the banks were very nice to us. We were saying 'We need a lot more data and we need it up-to-date' and they were saying 'Fine, here it is'."

Bollard's book gives a sense of the human dimension of the global financial crisis as he and his colleagues had to respond to its consequences for this country, first on the financial system and then in the real economy.

Long days began with a nervous catch-up with the overnight news. They could never be sure how much worse things might get, but had to be ready to respond in any case."In real time it is very hard to have a clear view through it all."

During both the September 2008 and December 2008 monetary policy statements Bollard had to battle stress-induced migraines. "I don't want to make a big thing of that," he said.

"I think I'm quite good at getting through stress events. I don't get overly hyped up and lose perspective. But nevertheless you can only manage yourself to a certain degree. You don't know how long it is going to go on for."

He read a lot about the 1930s. "It had a resonance. But we had learned from it. We saw much better international co-operation in the financial sector."

There were protectionist moves on the trade front but nothing like what happened in the 1930s. "That hasn't really affected us very much either, but we were worried when we started seeing dairy restrictions put in place [by Europe] and so on."