our boards frequently exhibit a diffuse segregation between their own responsibilities and that of the administration, in addition to informal structures, low number of professionally trained board members or members with a small degree of independence. 6. as a result, the main challenge to be faced in brazil in governance issues involves the relation between controlling stockholders and minority stockholders or creditors. how to face this challenge? 7. as far as the brazilian financial system is concerned, the central bank follows some well established principles of corporate governance, including : • transparency, facilitating the analysis of the activities of the company, its economic and accounting reports and non - financial aspects inherent to its businesses, offering to those interested a comprehensive vision of the corporation ’ s performance. the administration shall go beyond the obligation to inform, and reach the desire to inform, in addition to fostering good internal and external communication, which shall not be restricted to financial aspects, but shall be wide and comprehensive. • discipline, that is to say, commitment by the management in adhering to behavioral standards widely recognized as correct and appropriate. • independence, in what it relates to arrangements to safeguard or minimize possible conflicts of interest, such as the control by an executive or a majority stockholder. such arrangements include, for instance, a balanced composition of the executive board and administration and the use of external audit. • accountability, according to which agents of corporate governance shall be accountable for their actions before those who elected them and shall fully answer for acts practiced in the performance of their duties. • responsibility, by which executives shall care for the continuity of the organization and, therefore, shall incorporate considerations of social and environmental content in defining their businesses and operations, including a system for corrective actions and punishment, as needs be. • equality, which is translated into a fair and equalitarian treatment to all minority groups, either of capital or of other stakeholders, where discriminating policies or attitudes shall be deemed unacceptable. 8. based on the foregoing principles, the central bank, in its supervising role, follows the best international practices, materialized in the standards defined by the basle committee of the bank for international settlements, according to which corporate governance represents a critical issue in the banking environment. management shall monitor the establishment of corporate objectives, performance of the day - byday operations, defense of stakeholder interests, conformity to applicable laws and regulations, and care for the interests of depositors. 9. therefore, the directive applied by the central bank reaches beyond the mere relationship of

european central bank : press conference - introductory statement introductory statement by mr willem f duisenberg, president of the european central bank and mr lucas papademos, vice - president of the european central bank, at the press conference held in frankfurt, 5 june 2003. * * * ladies and gentlemen, the vice - president and i will now report on the outcome of today's meeting of the governing council of the ecb. following a comprehensive economic and monetary analysis, we have concluded that the outlook for price stability over the medium term has improved significantly since our last decision to lower interest rates in march. as a result, we have decided to reduce our key interest rates by 50 basis points. this decision is in line with our monetary policy strategy, including the aim of maintaining inflation rates below but close to 2 % over the medium term. at the same time, this interest rate reduction takes into account the downside risks to economic growth. the governing council will continue to monitor carefully all factors which are relevant to its assessment. let me explain our assessment in detail. in the context of our economic analysis, the latest data releases on real gdp growth have confirmed that economic activity in the euro area remained subdued in the first quarter of this year. this outcome also reflects the negative impact of the iraq crisis on both the global economy and the euro area. however, the survey evidence for april and may does not suggest an immediate improvement after the resolution of this conflict and is at best mixed. accordingly, economic growth in the first half of 2003 is likely to be very weak, and expectations for annual average economic growth for this year and for 2004 have had to be scaled down. nevertheless, we still expect a gradual strengthening of real gdp growth in the course of 2003, which should gather more pace next year. all available forecasts as well as recent financial market reactions seem to reflect a similar assessment. the main factors supporting this outlook are both external and domestic in nature. on the external side, the expected upturn in extra - euro area demand should compensate for the dampening effect of the appreciation of the euro. evidently, the significant and rapid appreciation of the euro over recent months will dampen external price competitiveness. however, the current level of the euro's real effective exchange rate, and thereby the competitive position of euro area exporters, is very close to longer - term averages. thus, when put into perspective, current euro exchange rate levels are in line with economic fundamentals and with our interest in