we took the view that unbalanced growth was better than no growth. the question now, of course, is where do we go from here. there have recently been encouraging, but still tentative, signs that the worst of the global slowdown may now be behind us, and that the us and eurozone economies are now beginning to bottom out and will pick up, perhaps to around trend, as we go through this year. some asian countries actively involved in the ict sector are showing a strong recovery, and even in japan financial markets have recently strengthened. as for the exchange rate, the euro, which has, as i say, been puzzlingly weak since soon after its introduction 3 years ago, still seems likely to strengthen eventually. as it becomes clearer that the international environment really is improving, and that external demand really is picking up, then we can look forward to better balanced and generally stronger growth in our own economy. that will in due course mean that domestic demand growth - and consumer demand growth in particular - will need to moderate if we are to avoid a build up of inflationary pressure. but let me be quite clear - that's not a warning, still less is it a threat. it is essentially just a matter of arithmetic! it's quite possible, even quite likely, that the necessary moderation of consumer demand - and i emphasise the word moderation - will come about of its own accord, given the gradual increase in unemployment we are currently seeing, and the build up of household debt. and provided it does not happen too abruptly, that would be the best possible outcome. but if consumer spending were not to moderate of its own accord, we would, in the context of strengthening external demand, clearly need at some point to consider raising interest rates to bring that moderation about. i don't suggest that the timing of any such move is imminent - that will obviously depend upon the timing and the strength of the recovery abroad and on the strength of domestic demand as we move forward. and that, subhash, is of course my answer to your second question - " what precisely will happen to interest rates? " in case any of you are confused, i think that what i said was that interest rates will rise - unless they fall or stay the same! mr president, there is no doubt that the past year or so has been a difficult time for the world economy which made life increasingly difficult for the internationally - exposed sectors of our own economy. we

for banks. i want to end with a few words on transparency. quite simply, there will in my view be more of it in the future. when i started in supervision in the late 1980s, we prohibited banks from disclosing their basel i capital ratios, and we got exercised when they did nonetheless bis central bankers ’ speeches declare their ratios. that was a relatively simple regime. the basel iii regime is undoubtedly more complex and it is not about the single capital ratio. capital requirements and buffers will vary between firms and over time, for good reasons. banks and investors do complain about the lack of clarity about their future requirements in this regime. but that precision is not realistic. within defined parameters the regime is designed so that buffers adjust in relation to risk and the impact of firm failure. counter cyclical buffers can be varied over time depending on conditions, and banks can move between gsib buffers as they change size and structure. likewise, supervisory work, including stress testing, can lead our judgement about appropriate buffers to change. the regime is built this way deliberately to include a greater element of judgement by supervisors. my view is that this will inevitably lead to more transparency and disclosure, which is fine and to be encouraged providing it can deliver useful guidance. that means we have to work hard to deliver as much clarity as is possible in an uncertain world. and finally, we know that there is change on many fronts, the scale of which may only be exceeded by the scale of the crisis to which it is a response. as supervisors we are on the look out for unintended consequences of this change, and we will assess and refine our approach as needed. thank you. bis central bankers ’ speeches