low interest rate stance for quite some time, based upon the stability of prices. during this period, however, we have seen worsening global imbalances and sharp rises in house prices in many developed countries. we also need to watch the development of this global low inflation phenomenon further, to see whether it can be sustained in the time ahead. recently, the prices of raw materials such as oil and copper have risen sharply in line with the continuing rapid growth in emerging countries like china, and wages in these countries have also begun to rise gradually. in these respects, there is a latent possibility of the disinflationary effects of globalization we have experienced so far shifting into reverse in the future. another aspect of globalization, the integration of domestic and foreign financial markets, has led to many difficulties in the practical conduct of monetary policy. the major policy variables of concern to the central bank, including interest rates and exchange rates, are now very greatly influenced by external factors. central banks of small open economies, in particular, have seen their power to control these variables considerably weakened. they have come to recognize limitations to their capacity to conduct monetary policy on their own. in addition to this, the central bank's judgment and forecasting of the economic situation have been made more difficult, owing to the changes in the economic structure and heightened uncertainty arising from globalization. for instance, in judging the likelihood of inflation, it is now also essential to consider the global output gap, in addition to the domestic resource utilization rate. closing remarks ladies and gentlemen, apart from the benign aspects of globalization, it has also ushered in many serious challenges that our central banks now face. i look forward to this seminar providing the opportunity for productive, in - depth discussions of these important issues. i also hope that, although short, this seminar will led to establishment of a foundation for increasing policy cooperation among all our central banks, by way of the mutual friendships built up here among participants. although the schedule for the seminar is rather demanding, i close with the hope that all participants will also find the time to enjoy the beauty of korean culture, while relishing the atmosphere of this refreshing late autumn. thank you.

##ation has started to emerge in the public debate and consequently proposals for deregulation and arguments for greater supervision discretion have been put forward. this discretion poses serious problems of transparency and of equal treatment, due to the temptation to shape the financial system by handing regulatory powers over to supervisory authorities. a clear distinction should be made between regulatory and supervisory functions. this segregation is key to ensuring a greater balance of powers and responsibilities, allowing proper accountability. 2. regulatory arbitrage the financial crisis also showed the limitations of decentralised supervision in a world of increasingly integrated financial markets and institutions. we are now in a process of moving from a situation in which the regulatory and supervisory frameworks were of national competence to a situation where there are common rules and in the euro area also a common supervisor. a need for greater cross - border integration of financial regulation and supervision emerged from the policy debate and motivated the still on - going reform of basel rules and the creation of the banking union in europe. however, the degree of implementation of the post - crisis global regulatory reform agenda across countries varies significantly, giving rise to regulatory arbitrage. this is reflected in the search for gaps in national legislation that justify avoiding compliance with previous international agreements, as well as in the behaviour of the authorities that accommodate specific requirements, conditions and interests of the major international financial conglomerates. it is very important to identify and assess what the risks and cost of regulatory arbitrage are. 3. regulatory flaws in the european regulation the current banking union framework suffers from a critical weakness : its micro approach to managing banking crises disregards the financial stability risks resulting from interventions in ailing banks. the current resolution framework does not envisage a credible public backstop and lacks government stabilisation tools. in fact, the framework governing intervention in problematic banks does not take into account the fact that the need to preserve financial stability must always prevail over the specific rules of intervention in banks. as recent cases illustrate, the european bail - in framework does not exclude bail - out events when financial stability issues ( or the public perspective of it ) are at stake. in addition, there is also the question of whether the lender of last resort is prepared and willing to lend all the liquidity that is needed when a bank is in distress but is still solvent. otherwise, the trigger for a banking failure is not insolvency but illiquidity. another limitation stems from the rules on mrel ( minimum requirement for own funds and eligible