questions, apparently didn ’ t even understand the arcane world of modern finance and banking and according to a column in the financial times, after the crisis, one leading global bank ran an advertisement inviting applications for board positions from experienced professional bankers! besides, rather than take timely notice of, and act on, early warning signals coming from financial markets, like stock and cdss markets, regulators chose instead to shut themselves to these early warning signals themselves by banning short selling which act effectively amounted to shooting the messenger for the unpalatable message it had to convey! another development that portends build - up of systemic risk is a rather rapid growth of etfs with usd 1. 5 trillion in assets under management ( aum ) which has close parallels, in terms of complexity and opacity, with the cdo market, including its “ squared ” and “ cubed ” variants. financial stability board and financial services authority have already raised concerns what with emergence of synthetic etfs, inverse, or short, etfs and leveraged etfs. in particular, there are concerns with synthetic etfs which depend upon a swap with parent bank to track return of an index against collaterals which considerably deviate from the index being tracked. this gives rise to the possibility that banks may be using etfs to finance their riskier and illiquid assets cheaply than they would be able to do in a standard repo market. the synthetic etfs also introduce counter - party risk not present in plain vanilla etfs. however, that leaves out the non - etf financialized commodities as a significant component of the total global financial assets worth us $ 242 trillion ( banking assets : $ 104 trillion, equity : us $ 47 trillion and bonds : us $ 91 trillion ), of which there is no estimate in the global financial stability report of imf ; above - ground gold itself is worth about us $ 10 trillion at current prices! specifically, regulators / policy - makers need to deliver counter - cyclical prudential measures like selectively increasing capital charge for riskier categories of assets by increasing risk weights for asset classes where bubbles exist, or are in the process of building. in addition, they need to be complemented by fixing the maximum absolute leverage ( not allowing for risk weights for assets ) in addition to risk weighted asset - based capital prescription. these regulatory measures obviate the need of monetary policy tightening which is a blunt tool indiscriminately affecting all sectors of the financial markets and

at the same time, one should not overlook the fact that in a country where land is scarce and substitute locations do not represent a competitive alternative, property remains a popular component of investment portfolios because of the widespread anticipation of large capital gains. developers, therefore, are willing, and indeed seem able, to hold on to vacant property in the expectation of a rebound in prices. this prevents prices from finding their true level. reference is made in your statement in the bank ’ s annual report to the independence of the institution. will this change with the entry into the euro area? if anything, the importance of the bank ’ s independence, which is already enshrined in maltese law and has been duly respected by successive governments, will be even greater once the bank becomes a member of the eurosystem. first of all, the autonomy of national central banks is mandated by the maastricht treaty. reflecting this requirement, the central bank of malta act now fully guarantees the institutional, functional, financial and personal independence of the bank and of the members of its decision - making bodies. as for the ecb, it has adopted low inflation as its overriding objective, and its independence helps to guarantee its ability to deliver on this commitment. as i said earlier, the governors who sit on the governing council of the ecb do so in a personal capacity and must be guided only by euro - area wide considerations. as members of this council, therefore, governors of national central banks must not only be persons of recognized professional competence and personal integrity, but they must also be prepared to defend their own bank ’ s as well as the ecb ’ s ability to act independently of political and other pressures.