in the field of economics and finance, outcomes are shaped by human behaviour – which, contrary to fundamental assumptions, is not always rational. in addition, economic systems are reflexive, in the sense that beliefs about what will happen often influence what does happen. going forward, as the global landscape and expectations of economic agents adjust to, as yet, an unknown new normal, the demands on the timeliness and quality of data and analysis will only increase further. in addition, an economic or financial crisis often would prompt a rethink of our approach to policy - making and of relevance, a re - evaluation of the statistics we use as the basis for our decisions. in this regard, the recent global financial crisis is no different. allow me to highlight two lessons from the recent financial crisis. first, the crisis highlighted that our understanding of the financial system was insufficient. financial innovation had resulted in a significant increase in financial intermediation taking place outside the regulated banking sector – what is today known as shadow banking. excessive risk - taking and leverage, by both regulated and shadow financial institutions, had significantly increased the vulnerabilities in the financial system. focus on the stability of bis central bankers ’ speeches individual institutions alone was not sufficient. instead, attention is required on the stability of the financial system as a whole. these underscore the importance of improving data coverage to keep pace with the constantly evolving economic and financial landscape. second, the unprecedented scale and scope of the crisis demonstrated that the interplay between exposures in the regulated financial system, the unregulated shadow banking system and the real economy can have interrelated implications. financial imbalances – in the form of excessive leverage and asset price bubbles – had built up amid stable inflation prior to the crisis. consequently, the long drawn out process of deleveraging and balance sheet repair by financial institutions, households and governments have suppressed aggregate demand amid less effective expansionary policies. in hindsight, more micro - data would have detected increasing systemic vulnerabilities in the residential property market, as well as increasing exposures among economic agents throughout the economy. to this end, more granular data would overcome the limitations of aggregated data in detecting vulnerabilities that are concentrated in selected segments of the economy and financial system. while these challenges in totality may appear to be rather daunting, i strongly believe they are surmountable, especially with greater collaboration amongst statisticians, compilers and end - users of data

a level playing field. to avoid or mitigate potential disruptions in wholesale dollar funding markets, the proposed rules require foreign banking organizations to hold sufficient high - quality liquid assets to meet expected near - term net outflows in a stress scenario. these rules should reduce the pressure on foreign banks that rely heavily on short - term dollar funding to either sell illiquid dollar assets or cut back on dollar lending in times of financial stress. by helping to alleviate disruptions in dollar funding markets the rules should also reduce the reliance on swap lines in a future stress episode. finally, the central role played by money market funds in the 2011 episode is a reminder of the fragility of these funds themselves – and of the risk created by their combination of risky asset holdings, stable - value demandable liabilities, and zero - capital buffers. the events following the lehman brothers bankruptcy in 2008 provide even starker evidence of the risks that money market funds pose for the broader financial system. in light of these vulnerabilities, i welcome the recent proposed recommendations by the financial stability oversight council for further money market fund reforms. 8 to conclude : financial globalization undoubtedly brings with it substantial benefits. at the same time, it creates important challenges for financial stability and for the appropriate design of regulation. the research discussed in conferences such as this one will help us better understand and respond to these challenges. thank you, and i look forward to your questions. see u. s department of the treasury ( 2012 ), “ financial stability oversight council releases proposed recommendations for money market mutual fund reform, ” press release, november 13. bis central bankers ’ speeches