christian noyer : european financial markets – opportunities for growth and value creation speech by mr christian noyer, governor of the bank of france, at the first french - indian financial forum, paris europlace, mumbai, 16 may 2007. * * * ladies and gentlemen, in the absence of mr mestrallet, chairman of paris europlace and ceo of suez group, who cannot be with us today because of last minute commitments that require his presence in france, i have the great pleasure of welcoming you to our first french - indian financial forum in mumbai. india ’ s rapid economic growth in recent years makes it an attractive investment destination for international investors. and the economic revival in europe also offers interesting opportunities to indian investors and issuers wishing to diversify their investment strategy. that ’ s why paris europlace believes that we all have a common interest in attending this forum today to discuss business opportunities between european and indian financial markets. i would like to express my warm thanks to my friend dr. rakesh mohan, deputy governor of the reserve bank of india, for being with us today. we are also very honoured to welcome mr ashok wadhwa, chairman, capital markets committee of ficci, the partner of paris europlace in the organization of this forum, mr ravi narain, managing director and ceo of the national stock exchange of india ltd and mr peter kurian, chairman of the association of mutual funds in india, as well as all the other distinguished representatives of the indian and french financial communities. as you may know, paris europlace brings together the whole range of market participants – issuers, investors and intermediaries – in order to contribute to the development of european capital markets and promote the paris financial center. the financial industry in india, as in europe, is expanding significantly. and we have already seen in the past few years the flourishing of partnerships between french and indian financial institutions : such as in the asset management industry, the joint venture between sundaram and bnp paribas asset management, or the sgam and sbi mutual funds partnership ; in insurance services, the bharti and axa life insurance partnership, and the joint venture between sbi life and cardiff ; and in online brokerage : current developments involving cortal consors and geojit. it is for this reason that it was decided by paris europlace to focus our program on the development of opportunities and potential new partnerships between mumbai and paris, as well as

to which i will return shortly. the deterioration of the real economy and subsequent easing of inflationary pressures opened room for a substantial relaxation of the monetary policy stance. in the euro area, seven reductions in policy rates brought the interest rate on our main refinancing operations from 4. 25 % in october 2008 to 1 % today. • second, those interventions have been flexible and highly innovative. central banks saw as their mission to avoid the paralysis of financial intermediation and keep the monetary transmission mechanisms working efficiently. to achieve those objectives, they considerably expanded and diversified their tools and instruments. in countries where markets play an important role in the allocation of credit, they created numerous new facilities to provide financing and to lower spreads through the purchase of private and public debt securities. in the euro area, where banks are dominant, interventions were designed to ensure that adequate liquidity would flow into the system without obstacles or restrictions. it has become commonplace to talk about those measures as " unconventional " and, indeed, they are. the important point, however, is that they do not substitute, but complement " conventional " movements in policy rates and can be implemented in parallel. in other words, there is no need to wait for policy rates to reach zero ( or any " lower bound " ) to innovate in the design and implementation of monetary policy. for the euro area, the most important shift took place in october 2008, when the governing council decided to allocate liquidity to banks in unlimited amounts at the policy rate. although it was not advertised as such at the time, this apparently technical measure deeply transformed the policy framework and marked the move into unconventional territory. • third, those interventions have been remarkably cooperative and convergent. the largest coordinated reduction in interest rates in history took place on 8 october 2008 with the participation of seven major central banks. a dense network of bilateral swap agreements has insured that liquidity shortages in international banking and financial markets can be addressed speedily and efficiently. finally, as the crisis triggered a synchronized slowdown in activity and inflation worldwide, monetary policy rates have converged to low and comparable levels. remaining differences can be explained by slight differences in economic prospects and financial systems. monetary conditions are almost identical : three and six months libor and euribor rates do not differ by more than 50 basis points. i strongly believe that those three features – speed, innovation and cooperation – allowed central banks to play a decisive part in containing the crisis and limiting its impact. has