sorts of capital inflows which you may well see within a few years. conclusion in conclusion, i would argue just one simple line - the inflation targeting regime has been enormously useful to us in australia, and used as a form of “ constrained discretion ” it may well be an important part of a good regime in other asian countries which do not have a strong commitment to a fixed exchange rate. the inflation target provides an organisational framework for the debate on the impact of capital flows and the exchange rate. but good policy does not come from simple one - dimensional rules - it comes from strong institutions, a rigorous policy debate, and a dominant priority given to that rarest element in policymaking - common sense. references ball, laurence ( 2000 ), “ policy rules and external shocks ”, nber working paper 7910. bharucha, nargis and christopher kent ( 1998 ), “ inflation targeting in a small open economy ”, reserve bank of australia research discussion paper no 9807. available at http : / / www. rba. gov. au. debelle, guy ( 1997 ), “ inflation targeting in practice ”, imf working paper wp / 97 / 35, march. debelle, guy ( 1999 ), “ inflation targeting and output stabilisation ”, reserve bank of australia research discussion paper no 1999 - 08. available at http : / / www. rba. gov. au. debelle, guy ( 2000 ), “ the viability of inflation targeting for emerging market economies ”, paper presented at australian national university conference, “ financial markets and policies in east asia ”, canberra, 4 - 5 september. masson, pr, ma savastano and s sharma ( 1997 ), “ the scope for inflation targeting in developing countries ”, imf working paper wp / 97 / 130, october. mishkin, frederic s ( 2000 ), “ inflation targeting in emerging market countries ”, nber working paper 7618. mishkin, frederic s and miguel a savastano ( 2000 ), “ monetary policy strategies for latin america ”, nber working paper 7617. ryan, c and c thompson ( 2000 ), “ inflation targeting and exchange rate fluctuations in australia ”, reserve bank of australia research discussion paper no 2000 - 06 ( forthcoming ). svensson, lars ( 1998 ), “ open economy inflation targeting ”, nber working paper 6545.

carlos da silva costa : why we must complete banking union financial stability threats would hit citizens'trust article by mr carlos da silva costa, governor of the bank of portugal, in the 100th edition of the omfif bulletin, 21 january 2019. * * * following the 2008 crisis, reforms were needed in europe ’ s financial sector. the establishment of the single rulebook and the launch of the european union ’ s banking union with its rules and institutions constitute a commendable success in this regard. the banking union is currently based on two pillars : the single supervisory mechanism and single resolution mechanism. however, since these were put in place, the political will to complete the banking union has waned. the banking union is missing critical elements – a fully - fledged european deposit insurance scheme, a backstop to the single resolution fund and the provision of liquidity in bank resolution – which jeopardises its fundamental benefits. as we progressed along the road, new and bigger hurdles emerged. policy - makers focused excessively on ‘ risk reduction v. risk sharing ’ and lost sight of the banking union ’ s overall objectives. incomplete setup in this incomplete setup, banks are ‘ european in life but national in death ’. supervisory and resolution decisions are mostly taken at the european level, but the ensuing consequences still lie with taxpayers at the national level. this may have a potentially serious impact on national budgets, as the ultimate guarantor of financial stability remains national. in view of the mismatch between european oversight and national liability, the different stakeholders ’ objectives and interests are unaligned. it is important to consider who is actually looking after financial stability. four years after the ssm became operational, much has been accomplished. daniele nouy, the former chair of the supervisory board ( 2014 – 18 ), must be praised for her decisive contribution to this success. her perseverance was essential to establish the mechanism ’ s credibility. as andrea enria takes over nouy ’ s mandate, now is a good opportunity to reflect on the many achievements of europe ’ s crisis management set - up and draw some preliminary lessons from the current ( incomplete ) architecture. looking ahead with the benefit of hindsight, we should reflect on the need to strengthen the ssm ’ s decisionmaking process, the need to draw a line clearly between regulatory powers and supervisory oversight, and ensuring the application of the principle of eu ‘ financial stability responsibility, regulatory responsibility and supervisory responsibility ’. strengthening the decision - making process of