. why is this so? trichet : i think that observers and market participants are certainly listening to what we say, on both sides of the atlantic. two questions : what are your expectations as regards the financial market crisis and what repercussions will it have on credit activities for businesses? trichet : at the moment outstanding loans to the non - financial corporate sector are growing at a rate of 15 %, which is dynamic. on the one hand we see a progressive slowdown as regards loans to households and the housing sector. at the same time credit standards have tightened and we have to look at the situation very carefully. as regards the very significant ongoing market correction we will continue along our path : on the one hand adopting the appropriate monetary policy stance to deliver price stability and, once that decision is made, we have to ensure the smooth functioning of the money market in line with our policy rate. as you know, we have also been in close contact with other central banks, including the federal reserve. in the course of the financial crisis the impression of many people is that gains are privatised and losses are socialised. do you regard this as a problem? trichet : i think the issue of moral hazard is very important. it is absolutely clear that if those who have behaved improperly are not punished and do not take their losses then we cannot pave the way for sound decisions of financial institutions in the future. therefore we have always made the point that what we are doing is not, in any manner, aiming at bailing out any individual or institution and at diminishing the losses that would be made because of bad management. it is all about protecting those who behaved properly against the harm that has been done to the market as a whole by those who have taken bad decisions. that has been very well understood by observers and by market participants. but there are tendencies in the european union to think that bailouts would be considered if distortions of the economy are at stake. trichet : i was speaking for the ecb, the eurosystem and central banks in general. in exceptional cases one can imagine that the executive branches and the parliaments would consider that the systemic risk associated with the collapse of one particular institution because of a solvency issue would make it worth mobilising taxpayers ’ risk and taxpayers ’ money. this is something which cannot be excluded. as central banks we exclude taking such risks associated not with a liquidity issue but with a solvency issue of

frequently - reviewed inflation targets – rather than fixed inflation targets – in south korea, indonesia, thailand, and the philippines. the greater flexibility in the region relative to advanced economies may reflect several factors : ( 1 ) the difficulty in pinpointing an optimal inflation rate, partly due to the rapid structural changes and the evolving stages of economic developments ; ( 2 ) a greater fluctuations in the economy caused by volatile commodity prices and exchange rates ; and ( 3 ) the need to use the target range to prevent the public from forming the impression that meeting the inflation target is prioritized at the expense of economic growth. c. allowing greater movements in the exchange rates since the east asian economic crisis, south korea, indonesia, and thailand have abandoned the rigid u. s. dollar peg system. other economies in the asia - pacific region have also increased flexibility in their exchange rate arrangements. overall, their exchange rates have become more volatile and it now seems that none of the economies in the region target specific levels of exchange rates against the u. s. dollar ( chart 6 ). shifting toward more flexible exchange rate arrangements in the inflation - targeting economies, imf classifications consider that australia and japan are adopting free - floating exchange rate arrangements with no foreign exchange market interventions, similar to the united states, the euro area, and the united kingdom ( chart 4 ). the exchange rate arrangement in new zealand was generally regarded as free floating, but was reclassified as floating because small interventions were made to dampen the sharp bis central bankers ’ speeches appreciation of the new zealand dollar since 2012. the arrangements in south korea, thailand, and the philippines are also classified as floating with each having more frequent interventions than new zealand. meanwhile, indonesia is regarded as having a less flexible arrangement than these economies. it is classified as having a so - called crawl - like arrangement because the rupiah has followed a depreciating trend against the u. s. dollar within a margin of less than 2 percentage points since june 2012. the imf regards the indonesian arrangement as a de facto exchange rate anchor to the u. s. dollar. indonesia ’ s preference for a stable exchange rate may reflect the need to stabilize the prices of imported and exported commodities, as well as to preserve the value of foreign debt denominated in the u. s. dollar. some studies point out that the inflation - targeting frameworks in south korea, thailand, and the philippines have resulted in higher volatilities in the exchange rates. moreover