haste to reverse course — undermine the robustness and resiliency of the financial system. the u. s. housing market boom and bust at the heart of the crisis was the u. s. housing boom and bust. between 1997 and 2006, u. s. home prices nearly doubled in real terms on a national basis. then, when the boom turned to bust, real home prices reversed course, declining by about 40 percent on a national basis, with larger price declines in several states. 1 the magnitude of the national price declines was unprecedented during the postwar period. the evolution of the financial crisis illustrates a number of key issues, including the potential hazards of financial innovation, the procyclicality of the financial system, and the importance of confidence in sustaining effective financial intermediation. the housing boom resulted from several factors. innovations in subprime mortgage lending enabled moderate - income households to purchase homes with negligible down payments. this led to an increase in the demand for housing, which helped push up home prices. home price appreciation masked the potential riskiness of such lending and, in turn, sustained the wisdom of 1 / 7 bis central bankers'speeches the easier underwriting standards. as long as home values were rising, subprime borrowers could either refinance their loans or sell their homes when the initial teaser rates expired. thus, losses on subprime and other mortgage lending were low, reinforcing the belief that such loans were “ safe. ” easier mortgage underwriting practices were also supported by the ability of mortgage originators to pool their mortgages into collateralized debt obligations ( cdos ), transforming lowquality assets into triple - a - rated securities. investors, including banks, relied too heavily on credit ratings and didn ’ t do sufficient due diligence on the underlying quality of the assets and the assumptions that underpinned the triple - a ratings. implicit in these ratings was the assumption that a large, national decline in home prices was extraordinarily unlikely. the rise in home prices led to a surge in construction activity, which helped to sustain the housing boom for a time. this effect was particularly powerful in states such as arizona, california, florida, and nevada. rising home prices also bolstered the economy by supporting consumption, as households monetized these gains by cash - out refinancings and home equity lines of credit. the housing boom was also supported by an accompanying financial boom. the financing activity associated with

the principles of international financial reporting standards. thus, the implementation of these standards at individual level by credit institutions in romania has taken a graduated approach. at consolidated level, i. e. banking groups, the international financial reporting standards have been transposed via a seamless approach ; the nbr exerted its national options embedded in the acquis, but included all credit institutions, not only the listed ones, in the scope of applicability. in 2010, the national bank of romania adopted the strategy for ifrs implementation by credit institutions starting with the 2012 financial year. for its implementation, the updating of the accounting regulatory framework was completed and steps were taken to ensure bis central bankers ’ speeches transition towards the new standards. thus, credit institutions will prepare and present action plans whose implementation will be monitored by the central bank throughout the remainder of this year. also in the first half of 2011, the financial reporting framework suiting the needs of the supervisory authority was updated. the national bank of romania, in its capacity as an authority responsible for prudential supervision of the banking system, has recently prepared and sent for public consultation the bills needed to elicit accounting figures reported by banks so that they match the banks ’ prudential objectives. i trust this endeavour aimed at broadening the scope of applicability of such standards, serving as the basis for accounting and for preparing individual financial statements by credit institutions in romania, should be seen as a sine qua non condition to secure effective supervision of the romanian banking system. let me stress that the importance of implementing the international financial reporting standards by credit institutions in romania is also reflected by the new financing agreements signed with international institutions ( the european commission, the international monetary fund, the world bank ). i am confident that you experts have now a good opportunity for an in - depth analysis of the evolution of the international accounting system and the problems arising in the implementation of international financial reporting standards, as well as for a useful projection of the major challenges to implementing the new accounting standards by the banking sector in romania, given its importance in achieving a modern and efficient accounting system. let me reiterate on this occasion our institution ’ s willingness to cooperate with stakeholders in the implementation of international financial reporting standards by the banking sector. i trust that any problems relating to the introduction of the new accounting rules will be resolved in a timely manner so that the current transition ends successfully. last but not least, my appreciation goes to the representatives of the institute of chartered