The decisions taken in early December to extend our monthly net asset purchases of € billion to at least the end of March 2017, and to reinvest the principal payments on maturing securities for as long as necessary, were fully appropriate. They will result in a significant addition of liquidity to the banking system and will strengthen our forward guidance on interest rates. Yet, as we start the new year, downside risks have increased again amid heightened uncertainty about emerging market economies’ growth prospects, volatility in financial and commodity markets, and geopolitical risks. In this environment, euro area inflation dynamics also continue to be weaker than expected. It will therefore be necessary to review and possibly reconsider our monetary policy stance at our next meeting in early March, when the new staff macroeconomic projections become available which will also cover the year 2018. In the meantime, work will be carried out to ensure that all the technical conditions are in place to make the full range of policy options available for implementation, if needed. Let me now explain our assessment in greater detail, starting with the economic analysis. Euro area real GDP growth was confirmed at 0.3%, quarter on quarter, in the third quarter of 2015, supported mainly by private consumption, while being dampened by a negative contribution from net exports. The most recent survey indicators, available up to December, point to ongoing real GDP growth momentum in the fourth quarter of last year. Looking ahead, we expect the economic recovery to proceed.

As industrial and emerging countries continue to strengthen their own regulatory standards, financial market participants may relocate their operations to offshore financial centres to take advantage of relatively lax regulatory standards. It is thus important for offshore financial centres to strengthen their supervisory systems and standards. To encourage these centres to comply with international standards, various measures could be considered. For example, higher risk weights could be applied  5  BIS Review 47/1999  to counter-party transactions for banks doing business with a financial entity operating out of an offshore jurisdiction that does not comply with Basle Core Principles. Conclusion Taken together, the three approaches could result in quite an extensive overhaul of the international financial architecture and a great deal of co-ordination on the international front. This is no easy undertaking, and the nature of the problem means that the process of reform needs to be both comprehensive in market coverage and inclusive in the involvement of interested parties. Crossborder speculative attacks target the vulnerabilities and weaknesses of particular economies and thrive by exploiting the gaps and inconsistencies between jurisdictions. It is therefore essential that emerging markets, and not just the big industrialised economies, are involved in the reform process. Emerging markets have been most affected by the volatilities of the last couple of years, and their experience is crucial for the formulation of workable policies: they have a different perspective of events and different needs from those of the larger, industrialised economies.