to private domestic agents ( admittedly including future generations ). the public intermediation of these savings naturally leads us to the question of the appropriate manner in which to manage such large holdings. the management of international reserves the facts high current account surpluses mechanically reflect an excess of domestic ( private or public ) savings, which must be invested abroad. but in east asia and commodity - exporting countries, these accumulated excess savings appear to be largely held by sovereigns. in addition to foreign exchange reserves, a growing part of these foreign assets is now invested through sovereign wealth funds ( swfs ). for the time being, the assets managed by swfs ( around usd 2. 5 trillion ) are relatively small compared with the global capitalisation of bond and equity markets – about usd 100 trillion – or even compared with the holdings of the private asset management industry ( pension, insurance and mutual funds ), estimated at around usd 55 trillion. however, according to some estimates, swf assets could more than treble over the next 5 years and reach around usd 8. 5 trillion in 2012. all swfs share a common purpose which is the transfer of wealth across time. the objectives of central banks are different, namely to foster price stability and financial stability. besides, central banks may be more sensitive to headline risk, and exposure to large losses could damage their credibility. creating an entity separate from the central bank, an swf, in order to manage risky assets has often been seen as a good governance structure. such a structure is also expected to set up a chinese wall between central banks and swfs, eliminating the risk of trading based on insider policy information. the effectiveness of such segregation may yet be challenged, but more importantly, it may not completely prevent conflicts of interest. a distinction probably has to be made between commodity and non - commodity swfs. in oilproducing economies, foreign asset accumulation stems from oil royalties reflected in large government budget surpluses, so that their management by public entities is a natural outcome. the funding of commodity swfs stems from a domestic resource that is most of the time owned, exploited or taxed by the government : in this respect it is genuine sovereign wealth, and the result of public savings. by contrast, foreign reserves and swf accumulation that is not commodity related might be seen as primarily a diversion of excess private savings. commodity funds the set - up of stabilisation funds by oil - exporting countries was first motivated by the desire to smooth oil revenues

the departure from the paradigm? yes, especially since we also used a number of administrative measures, controversial at the time, but which now – after the crisis has warranted their use – are considered valid macroprudential instruments. i will name some of them : enforcing maximum loan - to - value ratio, introducing debt service ceilings relative to households ’ monthly disposable income ( the scope of which was subsequently expanded to include non - bank financial institutions engaged in lending ), setting limits to banks ’ forex exposure vis - a - vis unhedged borrowers, using differentiated coefficients in stress tests ( higher for exposures to eur than lei, with even stricter coefficients for chf - and usd - denominated credit ). at the time, banks perceived such measure as excessive administrative interference and i even remember a rather uncomfortable discussion with the president of a large foreign bank operating in romania, who reproved me for the fact that, only a few years after being invited to invest in our country, banks were facing regulatory “ innovations ” that narrowed their scope of business. 4. was the unorthodox approach effective? with the benefit of the hindsight, i would say it was, at least to some extent. i see now 3 limitations and 3 benefits of the approach we took 10 years ago. let me start with the limitations : first, the measures were not entirely successful in cooling off foreign currency lending, as banks found ways to circumvent the restrictions in place by externalising credit portfolios. forex credit continued to expand, its share in total credit approaching 60 percent by the end of 2008. we are still dealing with this legacy : for instance, swiss franc loans, even though accounting for a much lower share of total credit than in neighbouring countries, proved troublesome in the wake of the recent chf appreciation. second, implementing the unorthodox measures has also proven very difficult from the communication perspective. these measures proved difficult to explain to the public at large, which saw them as preventing improvements in welfare, and also to the commercial banks themselves, which – as i said earlier – were protesting against what they saw as an uncalled for injunction into their activity. on top of that, we had a tough time explaining our policies even to the ecb. fortunately, president trichet understood why we had to take the unusual monetary policy approach, acknowledging that the standard policy consensus was not enough to deal with the challenges a small open economy