banks ’ bottom line. also it may potentially encourage more risk aversion, despite the ultra - accommodative monetary policy stance. it is critical, therefore, that regulators ensure a level playing field to avoid regulatory arbitrage and push banks to retrench, thus creating market gaps that can be exploited by page | 3 less regulated, or more importantly, by totally unregulated players. today ’ s increasingly digitalised world enables these gaps to be filled with relative ease. institutions must embrace innovation while exploiting more effectively and smartly the prevailing benign economic conditions, to discover new investment opportunities and niche markets. it is also an opportune time for banks to keep sight of their longer - term sustainability and maintain their efforts to repair their balance sheet, reduce concentrations and improve asset quality. this is what ultimately strengthens prospective future cash flows and what supports profitability. banks are also, of course, entitled to set their own risk appetite. in well - functioning markets, business opportunities shunned by one bank will be taken up by a competitor, if the latter feels more confident that it can manage the underlying risks more effectively. there will always be a residual sort of non - bankable business, and we must accept this fact. if, however, a business in search of a bank is especially risky but legitimate, there is no reason why we should not welcome specialist legitimate players capable of withstanding the most rigorous standards of supervisor scrutiny. to blame all on - boarding failures only on an ultra - conservative banking sector is simplistic and counterproductive. reality is more complex than that and the causes might vary from the risk appetite of the european supervisory landscape that follows a common rule book, to problems of asymmetric information, complex corporate structures or business models. unless we get down to this level, we can never really pass judgement on the actions of banks regarding who they on - board. banking is all about risk management and banks with a zero risk appetite will eventually starve and be forced out of the market. such risk aversion should not come at the expense of the right of all citizens to access basic banking services, as this will fuel financial and social exclusion. banks should therefore be encouraged to use their judgment and sense of proportion when exercising due diligence, and to consider their responsibility given their pivotal role in the financing of the economy. although certain aml / cft vulnerabilities had already been identified at a national level and actions

this graph as it is for lamb prices and the prices of many dairy products. graph 7 bis central bankers ’ speeches this rise in prices is the good news for domestic producers. the bad news is that the same forces that have driven up global prices have also put upward pressure on the prices of many inputs used by the farming sector. obvious examples here are the higher prices of fuel, fertiliser and seed. for some parts of the industry, these increases in costs have been a significant constraint on profitability. it is also important to recognise that there are substantial differences in the current situation across commodities. in particular, the producers of commodities whose global prices have not risen have found that the exchange rate appreciation and higher input costs have had a significant effect on their competitive position in global markets. one clear example is the wine industry, where the price of grapes internationally has not shown the same pattern as that for many other commodities, with the australian dollar price of grapes falling significantly. as a result, the average australian dollar export price for wine has declined by around 40 per cent over the past decade, and production has fallen over recent years. and according to its latest assessment, abares does not expect a reversal of this trend in prices any time soon ( graph 8 ). 4 a similar, although less dramatic picture, is evident for some horticultural products. graph 8 turning now to the volume of output, as opposed to the price of output, the recent aggregate outcomes for the farm sector have also been generally favourable. according to the australian bureau of statistics ( abs ), farm gdp increased by almost 10 per cent in the past financial year, boosted by higher levels of rainfall. as one example, the winter wheat crop is expected to be a near - record high of around 40 million tonnes this year and this follows a good harvest last year. taking a somewhat longer perspective, farm output has increased by around 70 per cent since the mid 1990s, although there have been a number of bad years over this period, particularly due to severe drought. this combination of generally high prices and high output has provided a substantial boost to aggregate income of the farming sector over the past financial year, and another favourable abares ( australian bureau of agricultural and resource economics and sciences ) ( 2011 ), agricultural commodities : september quarter 2011. bis central bankers ’ speeches outcome is expected this year ( graph 9 ). after adjusting for inflation, farm incomes over these two years are expected to be almost double the average of the previous two decades.