prevent mergers and acquisitions, at least until they became stock companies. • another factor that may slow merger activity is that the strategic trend among the vast majority of bank holding companies in the united states has been toward specialization focusing on core businesses or a core customer base, which in turn determines the type of products and services offered. in past years, some criticism has been leveled at the industry for announcing mega - deals in what was perceived to be a response to peer pressure, rather than compelling economic reasons. i ’ d like to think that the disappointing post - acquisition results of some of these unions have taught the industry to think more strategically, and to weigh more carefully all the pros and cons of pursuing such transactions. deciding what combination of traditional and new activities will best create long - term economic value for your customers and shareholders will be a leading challenge as you contemplate the future of your organizations. challenges for supervisors the continuing evolution of the financial services industry and a newly modernized legal framework also pose significant challenges to supervisors. what are the objectives of supervision in the twentyfirst century? how can those objectives be best pursued? let me say first of all that there is no easy, single answer to these questions. the modern financial marketplace is too dynamic, too complex. we at the federal reserve, along with our domestic and international colleagues, are working hard to devise a flexible, multi - faceted strategy that emphasizes prudence and problem prevention, compatibility with the market, and a close and cooperative working relationship between the private and public sector. with these priorities in mind, i believe there are three essential elements of a modern supervision framework - effective bank - level management, market discipline and official supervision. effective bank level management includes sound corporate governance, rigorous internal controls and effective risk management. together these elements represent the first and most important line of defense against potential problems. this is increasingly the case as the activities of banks and other financial institutions become more complex and more global. the second line of defense against financial instability is market discipline, which has become an increasingly important ally of the official supervisor. of course, effective market discipline is not possible without meaningful public disclosure and more selective additional disclosure to counterparties. while significant progress has been made in recent years, it unfortunately remains the case that disclosure practices have not kept pace with the rapid changes in banks ’ business activities and risk exposures, and how these exposures are measured and managed. for this situation to be fully remedied, notions of what is

mark carney : summary of the latest monetary policy report opening statement by mr mark carney, governor of the bank of canada and chairman of the financial stability board, at the press conference following the release of the monetary policy report, ottawa, ontario, 23 january 2013. * * * good morning. tiff and i are pleased to be here with you today to discuss the january monetary policy report, which the bank published this morning. • while the global economic outlook is slightly weaker than the bank had projected in october mpr, global tail risks have also diminished. • the economic expansion in the united states is continuing at a gradual pace, restrained by ongoing public and private deleveraging, global weakness and uncertainty related to fiscal negotiations. • europe remains in recession, with a somewhat more protracted downturn now expected than in october. • growth in china is improving, though economic activity has slowed further in some other major emerging economies. • supported by central bank actions and by positive policy developments in europe, global financial conditions are more stimulative. • commodity prices have remained at historically elevated levels, though temporary disruptions and persistent transportation bottlenecks have led to a record discount on canadian heavy crude. • in canada, the slowdown in the second half of 2012 was more pronounced than the bank had anticipated, owing to weaker business investment and exports. • caution about high debt levels has begun to restrain household spending. • the bank expects economic growth to pick up through 2013. • business investment and exports are projected to rebound as foreign demand strengthens, uncertainty diminishes and the temporary factors that have weighed on resource sector activity are unwound. • nonetheless, exports should remain below their pre - recession peak until the second half of 2014, owing to a lower track for foreign demand and ongoing competitiveness challenges, including the persistent strength of the canadian dollar. • consumption is expected to grow moderately and residential investment to decline further from historically high levels. the bank expects trend growth in household credit to moderate further, with the debt - to - income ratio stabilizing near current levels. • relative to the october mpr, canadian economic activity is expected to be more restrained. following an estimated 1. 9 per cent in 2012, the economy is expected to grow by 2. 0 per cent in 2013 and 2. 7 per cent in 2014. the bank now expects the economy to reach full capacity in the second half of 2014, later than anticipated in october. • core inflation has softened