This does not mean we cannot do better, nor does it mean we need not do more. There is no cause for arrogance. I hope the worst will soon be behind us. Honoured guests: One repercussion of the past year's swift rise in inflation is the plunge in households' and businesses' real interest rates. Unfortunately, the Central Bank's brisk rate hikes have not sufficed to correct the course. Yes, real rates on new non-indexed, variablerate mortgages were 3 - 4% before the pandemic, fell to zero during the pandemic, and are now negative by 2%. Real rates on older fixed-rate loans are even more negative. Real rates on new non-indexed, variable-rate business loans were 3-5% before the pandemic. They fell to zero in 2021 and are still there. At the same time, real rates on deposits range between -5% and -10%. So in a way, history has repeated itself. Inflation and negative real rates have subsidised business investment and home purchases, and transferred wealth from depositors to leveraged households and businesses. Such a situation is unsustainable in the long run. The Central Bank has pushed against household debt collection with all its might. The Bank's financial stability measures have entailed tightening mortgage requirements by capping loan-to-value ratios and debt service-to-income ratios. These measures have helped cool the housing market and temper household demand for credit. They have supported monetary policy and reduced the likelihood that borrowers will end up in financial distress when conditions grow tighter.

This entails ensuring the appropriate level of expertise about the new businesses; assessing that all relevant risks are identified, monitored, measured, and managed for each business line and the firm as a whole; and establishing the appropriate interaction with the enterprise risk management functions and Boards of Directors. These are core parts of supervisory expectations for traditional risk management and banks need to ensure that they are applied appropriately as they evolve. Moreover, expansion into new activities can bring entirely new risks beyond the direct risks of each specific business. For example, a firm that expands by offering a broader set of products to its existing base of customers. This has the potential to introduce greater correlation of business line results and a different type of shock if a financial firm potentially loses multiple revenue streams should a single customer face distress. Alternatively, a firm might be inclined to use one business line to cross-subsidize another, which makes measuring and managing risks and allocating capital more difficult from a business line perspective. In both cases, the potential risks would need to be managed at the enterprise level to reflect these cross-business linkages. A second implication is the need for the supervisory community to be responsive to the evolution of firms’ strategies and business models. As firms evolve and pursue new strategies, supervisors need to understand those changes and assess firms accordingly. We must constantly evaluate the strategic focus of the firms we supervise and assess whether our approach and perspective are appropriate for the new activities.