sme abs ) represent a sizeable share of the market, many issues are retained and used directly as collateral for eurosystem refinancing operations. however, the eurosystem believes that sme abs could and should represent a sizeable source of bank financing. they could encourage lending to smes and foster the transmission of monetary policy by indirectly easing lending conditions to smes. in the press conference held on 2 may, ecb president draghi therefore announced a consultation with other european institutions on “ initiatives to promote a functioning market for asset - backed securities collateralised by loans to non - financial corporations ”. this statement was further backed by the announcement on 18 july that the ecb will continue to investigate the possible acceptance of certain guaranteed mezzanine tranches of sme abs. another structured instrument i would like to mention are contingent convertibles ( cocos ), which could complement banks ’ various refinancing instruments. as it is a fairly new instrument with a lot of different arrangements, it is difficult to estimate the exact scope of this market segment. cocos are a useful instrument to increase the capital base in times of stress. they automatically turn into core tier 1 capital if the trigger – mostly the core capital rate – is undershot. investors have to be compensated for this extra risk alongside default risk and subordination risk in case of insolvency. recently, this additional spread has shrunk as a consequence of the increased “ search for yield ” in the low interest rate environment. consequently, cocos may become establish as a funding instrument although they bear the risk of being converted or even written down to zero. as i approach the end of my speech, i would like to focus on a market which has changed a lot during the crisis and also plays a prominent role in central bank politics : the sovereign bond market. 6. sovereign bond market government bond markets have suffered during the ongoing banking crisis, especially as it turned into a sovereign debt crisis. they are no longer considered a homogeneous, risk - free asset class. investors ’ willingness to take risk diminished sharply. volatility and liquidity became the most important topics for market participants. bond buyers exercised greater scrutiny and a series of rating downgrades prompted investors to re - evaluate their belief that european bis central bankers ’ speeches government bonds are risk - free assets. this led to a differentiated perception of european government bonds and diverging yields for the individual countries. to a certain degree, the increased spreads seem

countermeasures. in this process, i will work to ensure that we can achieve more effective financial cooperation with major central banks and international financial organizations. we also need to pool our wisdom for the stable management of household debt. dear members of the bok family! the last two years have afforded me a good opportunity to look at the bank of korea from a more objective perspective. the outside evaluations of the bank differ from what we ourselves believe we are, and i think contain many points that we can refer to in conducting our tasks. here today, i would like to request the following : we need to look back once again, and consider the appropriateness of our ways of thinking and handling the work that we have taken as natural until now. all organizations tend to have their own thoughts and patterns of behavior distinct from those of other organizations. from the outsider ’ s view, however, this can be seen as a kind of institutional self - centeredness that tries to disregard changes in the environment. as i mentioned earlier, people ’ s expectations for the central bank are at this time higher than ever before. we should bear in mind that, if we do not think outside the box, it can be difficult for us to play the role and carry out the mission befitting the needs of our time. particularly, since the bank of korea is a national policy organization, we should always look squarely at the problems which the korean economy faces and maintain a positive attitude while seeking the appropriate policy options. only then will the bank of korea be able to be recognized as working together with the people, and contributing to the development of the national economy. to this end, i hope that all of you will devote yourselves to selfimprovement, and to being top - class specialists in your areas of work. i will devote myself to creating an environment in which all employees can trust and communicate candidly with one another. we should never forget that a workplace culture where seniors, juniors and coworkers trust, respect and care about one another is a very valuable asset which our predecessors have cultivated for a long time. dear fellow members of the bank of korea! i would like to briefly tell you my thoughts related to this organization and to its human resource management. i will completely reexamine the efficiency of our current management administration system and operating procedures. i will work to further enhance the positive aspects of the various reforms taken in the internal management area in the past years. if, however,