authorities addressed the crisis with tailor - made rescue plans for troubled institutions. however, this piecemeal support failed to prevent a rapid erosion of market confidence, especially after the lehman failure. authorities reacted by adopting more systemic approaches to prevent bank failures. one example is the troubled asset relief program in the united states. another is the common rescue framework adopted by eucountries in october 2008. under this framework, the eu countries committed themselves to fight the crisis through explicit government guarantees on retail deposits, guarantees for bank liabilities and capital injections. these programmes succeeded in halting the deterioration of confidence in the banking sector : bank cds spreads narrowed across the board and reached a permanently lower level from the middle of october onwards. the lesson learned is that system - wide stress demands a systemic approach to reducing the risk of bank defaults. the learning effect is also true of government capital injections into banks. these measures have been much needed to avoid a collapse of the banking system. however, many of the capital injections have been eroded by rising losses on toxic assets. this has prompted a number of governments to announce asset purchase or guarantee programmes. recapitalisation of troubled institutions is not sufficient unless authorities tackle the asset problem on banks ’ balance sheets simultaneously. central bank measures to address funding pressures by banks have also benefited from advancing insights. initially, the ecb and other central banks resorted to existing tools to stabilize overnight interbank rates. but the need for longer - term funding operations to address bank ’ s general unwillingness to lend in term interbank markets quickly emerged. while central banks supported the money markets, the situation in the wholesale and debt funding markets became critical. lending by non - bank financial institutions and across currencies also started to dry up. this prompted the introduction of new lending facilities, arrange currency swap lines between central banks and widen the range of counterparties beyond conventional frameworks. the lessons from this are twofold. first, during a prolonged liquidity crisis, central banks might need to shift their focus more towards nontraditional bank funding rather than just the money market. and second, when central banks are confronted with setbacks, they need to be pro - active to overcome those challenges. as i said, authorities implemented a number of policies to fight the pandemic. some of those worked, others didn ’ t. however, each of the measures has its merits, and i would like to stress that their success or failure are a matter of hindsight. i

stephen s poloz : summary of the latest monetary policy report opening statement by mr stephen s poloz, governor of the bank of canada, at the press conference following the release of the monetary policy report, ottawa, ontario, 17 july 2013. * * * good morning. tiff and i are pleased to be here with you today to discuss the july monetary policy report, which the bank published this morning. • global economic growth remains modest, although the pace of economic activity varies significantly across the major economies. • the u. s. economic expansion is proceeding at a moderate pace. the continued strengthening in private demand is being partly offset by the impact of fiscal consolidation. • in japan, fiscal and monetary policy stimulus is contributing to a rapid recovery in economic growth. • in contrast, economic activity in the euro area remains weak. • in china and other emerging market economies, real gdp growth has slowed, although it is stronger than in the advanced economies. this is exerting downward pressure on global commodity prices. • and, as a consequence, the bank has downgraded slightly its global growth forecast. • the global economy is still expected to pick up in 2014 and 2015. • in canada, economic growth is expected to be choppy in the near term, owing to unusual temporary factors. the overall outlook is little changed from the bank ’ s projection in april. • annual gdp growth is projected to average 1. 8 per cent in 2013 and 2. 7 per cent in both 2014 and 2015, supported by very accommodative financial conditions. • despite ongoing competitiveness challenges, exports are projected to gather momentum. this should boost confidence and lead to increasingly solid growth in business investment. the economy will also be supported by continued growth in consumer spending, while further modest declines in residential investment are expected. • growth in real gdp is projected to be sufficient to absorb the current material excess capacity in the economy, closing the output gap around mid - 2015, as projected in april. • inflation has been low in recent months and is expected to remain subdued in the near term. • the weakness in core inflation reflects persistent material excess capacity, heightened competitive pressures on retailers, relatively subdued wage increases, and some temporary sector - specific factors. total cpi inflation has also been restrained by declining mortgage interest costs. • as the economy gradually returns to full capacity and with inflation expectations well - anchored, both core and total cpi inflation are expected to return to 2 per cent around mid - 2015. bis central