Enhanced international coordination between monetary authorities is ensuring that their actions are part of a consistent overall strategy. These measures are highly exceptional with indeed unprecedented monetary easing leading key policy rates to historically low levels and the adoption, in certain cases, of unorthodox monetary policy actions. As such, they should greatly contribute to restoring confidence and a smooth functioning of money markets. Governments have moved aggressively to support banks' solvency and resilience. Since the Paris Declaration by euro area member-countries, Europe, under the leadership of France until year end, has been acting according to what I consider a sound and consistent action plan. I won’t enter into the details. Just bear in mind the three following elements. First, authorities are extending guarantees to banks’ refinancing so that they can, in turn, properly finance the economy. Second, significant reforms of accounting rules are now being implemented. Basically, these reforms allow banks to transfer instruments previously marked to market to portfolios where that will no longer be the case. They also provide for greater flexibility in methods used to value assets whose market has shut down. Third, and lastly, governments have confirmed their willingness, when warranted, to step in and support banks’ capital. What about France’s actions? Government and Parliament very quickly put meat on the bones of the European principles. A new bill has been passed, which provides for two things. First, it sets up a EUR 320 billion funding vehicle to guarantee banks’ medium-term refinancing (i.e. up to five years).

As you know, at the French President’s instigation, huge efforts are made to think about what has been termed a “new Bretton Woods”. Beyond these ambitious words, I do believe it to be useful to take a fresh look at the existing financial regulation. As a contribution to this debate, I would like to make two final sets of remarks. One has to do with the fluctuations of financial systems. The other concerns financial supervision. Financial systems that operate in the context of a developed market economy are, by nature, subject to cyclical forces. Some are a consequence of the business cycle. Credit activity is an obvious example, as credit demand is heavily influenced by economic activity. Others are from within financial systems. For instance, financial institutions’ equity position moves in line with asset prices especially in a fair value world where fluctuations result in capital gains or losses. The challenge for the authorities is to assess whether and to what extent regulations reinforce these dynamics and impact the entire financial system. With these questions in mind, work is being undertaken to examine the impact of prudential standards. It is also on this basis that the accounting adjustments that I mentioned earlier have been made. The need to develop a “macro-prudential” policy is now under debate. The general principle is straightforward: it consists in ensuring that supervision manages to limit risks for the stability not only of a particular institution, but also of the entire financial system. Its implementation, however, is complex.