if that progress continues, i believe it will be appropriate to consider removing the qualitative objection from ccar for those firms that achieve and sustain high - quality capital planning capabilities. we would continue to assess the capital planning practices of these firms as part of our ongoing supervisory processes. i would also see it as appropriate to adjust ccar ’ s assumptions regarding the balance sheet and capital distributions. these adjustments would take place in conjunction with the integration of the stress test into a firm ’ s regulatory capital requirements. leverage ratio in light of the substantial progress in the build - out of our overall regulatory capital and stress testing frameworks over the past few years, the federal reserve is taking a fresh look at the enhanced supplementary leverage ratio. we believe that the leverage ratio is an important backstop to the risk - based capital framework, but that it is important to get the relative calibrations of the leverage ratio and the risk - based capital requirements right. doing so is critical to mitigating any perverse incentives and preventing distortions in money markets and other safe asset markets. changes along these lines also could address concerns of custody banks that their business model is disproportionately affected by the leverage ratio. conclusion u. s. banks today are as strong as any in the world, as shown by their solid profitability and healthy lending over recent years. as we consider the progress that has been achieved in improving the resiliency and resolvability of our banking industry, it is important for us to look for ways to reduce unnecessary burden. we must also be vigilant against new risks that may develop. in all of our efforts, our goal is to establish a regulatory framework that helps ensure the resiliency of our financial system, the availability of credit, economic growth, and financial market efficiency. we look forward to working with our fellow regulatory agencies and with congress to achieve these important goals. 4 / 5 bis central bankers'speeches 1 see, for example, robert f. martin, teyanna munyan, and beth anne wilson ( 2014 ), “ potential output and recessions : are we fooling ourselves? ” ifdp notes ( washington : board of governors of the federal reserve system, november 12 ) ; and olivier blanchard, eugenio cerutti, and lawrence summers ( 2015 ), “ inflation and activity — two explorations and their monetary policy implications ( pdf ), ” imf working paper wp / 15 / 230 ( washington : international monetary

with exposure to interest rate risk can suffer considerable damage. policies in emerging markets the risks associated with increased capital inflows require the authorities to implement strategies that allow the prevention and management of possible problems in the economy and the financial system. the tools for policy makers fall into two groups. the first consists of measures to discourage capital inflows, on the assumption that portfolio flows are the most volatile, the main incentive for them being the search for yield. one way to weaken the draw for external financing is to lower domestic policy interest rates, even to levels that might not be optimal from the point of view of price stability. it is not possible to know the degree to which this consideration has influenced monetary policy in emerging economies, although some studies suggest that it could be significant. 9 aside from the issue of frequency, this approach can put at risk the anchoring of inflation expectations and compromise control over future inflation. additionally, the likelihood of financial instability can increase if many central banks react in the same way. another option in the same group is to enforce explicit capital controls, including restrictions on portfolio investment and short - term debt. some emerging economies have used these measures with various degrees of intensity, but, in general, on a temporary basis since they have noteworthy limitations. if they are effective, these controls can reduce the benefits of external resources that would not necessarily bring about future financial instability. but in general, their effectiveness itself tends to be weak, since it is hard to prevent evasion, and there seem to be no rules on the conditions under which the measures can be successfully applied. the resulting distortions reduce efficiency and can provoke protectionist measures in international trade. the second group of tools seeks to mitigate possible adverse effects, rather than discourage capital inflows themselves. a frequently used measure has been intervention by central banks in foreign exchange markets through the accumulation of international reserves, which see taylor, j. b. ( 2013 ), “ international monetary coordination and the great deviation, ” presented in the “ session on international policy coordination, american economic association annual meetings, ” san diego, california ; and caruana j. ( 2012 ), “ international monetary policy interactions : challenges and prospects, ” speech given at the conference, “ cemla - seacen, punta del este, ” uruguay, november. bis central bankers ’ speeches are a sign of domestic financial health, since they permit a country to face possible interruptions in the availability of foreign funding. nevertheless, international reserves can increase