probably know, is definitely not among the active players in the market. quite the contrary, alongside the other major holders, it has refrained from an active management of its gold holdings. the banque de france has always adopted a very prudent and rather conservative approach, acknowledging the fact that the issue of gold lending is a matter of common interest to the major holders. two main reasons are traditionally put forward to justify gold lending : – the first one refers to a question of principle. foreign currency assets are actively managed. why not extend this management to gold insofar as gold is considered to be part of a country ’ s external reserves? – the second reason is that central banks obviously have to take into account profit and loss account considerations. from this standpoint, gold should provide a return just like other assets. but the reasons for prudent management of gold reserves by central banks are, in our view, of utmost importance. central banks are typically “ risk averse ” when investing their foreign assets on the financial markets ; as far as gold management is concerned, an even more cautious attitude is required because of the characteristics of the gold market. central banks must be aware that their deposits may favour the financing of speculative gold sales. in other words, for a speculator ( or a producer ) who wants to take a position against gold, it would be very easy to be short because he can easily borrow from the official sector, which is a potential lender on this market. the result of this policy then would be a drop in the price of gold. furthermore, lending is even more delicate for a big holder : what is the use of lending if, at the same time, you are depreciating the value of your holdings? this question is effectively not the same when you hold 3, 000 tons as when you hold 300 tons. consequently, our policy regarding gold lending could be expressed as follows : a responsible holder must have a responsible approach to management. this means that the banque de france has to and does pay due attention to the trade - off between its own interests ( ie enhancing the return on its assets ) and the impact on the market. the gold market characteristics described earlier call for a cautious and coherent attitude. b. this banque de france view is now widely shared by the central banking community 1. concerning gold holdings : the ecb ’ s decision in july 1998 to hold 15 % of its reserves in gold, taken from the gold stocks of the

industry? the national supervisory authorities will remain the direct interface for financial firms on micro - as well as macro - prudential issues. as mentioned in the eu regulation, the esrb ’ s warnings and recommendations will be directed – i quote from the regulation – “ to the union as a whole, or to one or more member states, or to one or more of the esas or to one or more national supervisory authorities ”. recommendations can be also directed to the european commission, in the area of the elaboration of new eu legislation. nowhere do the legal texts mention that the esrb will address individual firms in its warnings and recommendations. but the industry also has to be aware that with the esrb and the overall european system of financial supervision we will be in a different environment. following deliberations by the esrb, competent authorities may decide to utilise the tools that are designed to counter the build - up of risk in the financial system. their tools, as you know, include possible capital addons, countercyclical capital buffers or maximum loan to value ratios. one of the first tasks of the esrb could be to review existing instruments and those that are being created at the global and the european levels. more generally, micro - prudential instruments that are well known in the banking sector, would be calibrated and used with a macro - prudential orientation. i want to refer here to the concrete example of counter - cyclical capital buffers. in july, the basel committee on banking supervision released its proposal for countercyclical capital buffers. the aim of such buffers is to make banks build up capital when system - wide risk is increasing following excessive credit growth. the buffers can then be drawn on when risks materialise and credit losses occur. the case of counter - cyclical buffers is particularly interesting, first because it is one of the tools with a clear macro - prudential orientation and second, because the esrb and the european banking authority ( eba ) could join forces for implementing the framework in europe. this is suggested by the european commission in its recent consultation paper on the potential role of the esrb and the eba in defining policies and standards that national authorities should follow. concluding remarks let me conclude. i see three reasons to expect relevant changes with the start of macroprudential oversight in europe. the first and most important reason is that better supervision should contribute to a more stable financial system