from carrying out certain types of investment banking activities if they wished to continue to rely on deposit funding. in a similar vein, in the united kingdom, the adoption of the recommendations by the independent commission on banking mandates banking groups to establish a separate subsidiary for their retail activities, and it prohibits the subsidiary from undertaking other businesses and risks. solutions to these challenges are far from straightforward. while these and other reforms by the basel committee and the financial stability board are expected to have far reaching implications for the landscape of the financial system as we know it today, they have yet to provide answers to many of the key questions that policymakers and the financial industry need to address in the pursuit of effective functioning and sound financial systems as we progress forward into the future. since the global financial crisis, significant attention has been directed at evolving an effective macro - prudential policy framework, which can serve to rein in excesses and strengthen the nexus between finance and the real economy. the concept of macroprudential policies is hardly new and can be traced back to as early as the late 1970s, in reference to the macroeconomic and financial stability implications from the rapid pace of lending to developing economies3. some emerging markets, including asia, have, since the 1990s, deployed macro - prudential policy instruments to manage imbalances in the financial system and capital flows. following the recent global financial crisis, greater attention is now being focused on the role, scope, instruments and governance arrangements for macro - prudential policy to preserve financial stability. new or strengthened mandates for macro - prudential policies are being established in a growing number of jurisdictions, supported by wide - ranging changes to the legislative framework and institutional structures. used effectively in combination with other policy tools, including micro - prudential measures and monetary and fiscal policy tools, macro - prudential policies have been demonstrated to significantly improve financial stability outcomes. effectively operationalising macro - prudential policy frameworks, however, remains a key challenge. by design, macro - prudential policies are intended to reduce the probability and severity of a future crisis. while further research will deepen our understanding of leading indicators and transmission channels, judgments will continue to have a key role. history has shown that political economic considerations have, at times, had an effect on the willingness of policymakers to act. despite the high costs of crisis on the financial system on the economy and on the society, there is still an inherent bias towards inaction. this underscores

mervyn king : the new inflation target speech by mr mervyn king, governor of the bank of england, at the annual birmingham forward / cbi business luncheon, birmingham, 20 january 2004. * * * i have always wanted to perform at villa park. now is my chance. economists at villa park are not as unusual a sight as you might think. it is not well known that john maynard keynes also came to villa park. in september 1913 keynes was visiting birmingham and decided to see the match of the day between the two top teams in the country - aston villa and blackburn rovers. on the following day, keynes wrote to duncan grant1 : “ there has been some amusement here, but mixed up with a good deal of boredom. birmingham has a very definite character. i went yesterday with 40, 000 other people to one of the peak football matches. the scene was very much as i imagine the coliseum. the ground is built on the same model - an immense oval rising all round tier above tier in about 50 rows so far as i could count. the crowd maintained a dull roar nearly all the time, rising into a frenzy of excitement and rage when the slightest thing happened. the match was between the two principal “ league ” teams of england. the local people were beaten by a team from lancashire, who had, so i was told, ‘ the best right wing in england, and the most expensive ’ ”. sadly, as keynes recorded, aston villa lost 3 - 1 and finished that season as runners - up to blackburn. it is unclear whether keynes ever again visited a football ground, and there must be a real possibility that, for him, villa park was the sum total of his football experience. in later years some of keynes ’ s disciples forgot not only his connection with villa park but also his view that price stability was a necessary condition for a successful economy. tomorrow is the 80th anniversary of the death of lenin, and it was to lenin that keynes attributed the remark : “ the best way to destroy the capitalist system was to debauch the currency. by a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens ”. after doing their best to test this proposition, successive british governments have committed themselves to stable and low inflation. and for the past decade, inflation has ceased to be a dominant consideration in the economic decisions of families and businesses. that has been achieved by aiming at a