all financial markets and extraordinarily low risk premia, had the effect of covering up the building up of significant imbalances. significant financial imbalances were in the making, at various levels of the global economy and financial system. among these were exuberant real estate prices, and a flourishing securitisation business, which facilitated excessive credit growth. a group of countries – including china, japan, and oil - exporting economies – were saving too much, while others – such as the us – were heavily borrowing to finance consumption and investment. these developments were unsustainable in the long - run. at the same time, in an environment characterised by low interest rates, a global search for yield may have led investors to take on too much risk. on the micro side, it became apparent that market participants ’ incentives were not aligned with the risks they were taking, and that some investors were not fully aware of the extent of their exposures, which contributed to the under - pricing of risk. in the banking sector in particular, deficiencies in the design of the prudential framework for banks, in the supervisory review of banks ’ risk management procedures and in the rules for compensation and pay were some of the microeconomic factors leading to important vulnerabilities. iii. regulatory and supervisory initiatives currently under discussion after witnessing the first global banking crisis since the great depression, it became clear that it was absolutely crucial to get the banking sector on a sound footing again. policy makers responded rather quickly and forcefully to the crisis, which resulted in a wideencompassing reform agenda. this reform agenda is very ambitious and time - wise rather tight, but before describing the measures under discussion, let me first briefly introduce the main actors in this area. the g20 provides the political and strategic impetus for the reforms, with the financial stability board ( fsb ) playing an important role in the policy coordination. various committees and working groups, of which the most prominent is the basel committee on banking supervision, are charged with reviewing specific international standards. as regards the reform agenda, the most important issues are the following : the adoption of high - quality capital and liquidity standards for banks, measures to reduce the financial system ’ s procyclicality, the introduction of a regulatory framework for systemically important financial institutions, the regulation of credit rating agencies and hedge funds, improving otc derivatives markets, and finally, sound compensation practices that support financial stability. these issues are comprehensively

bostjan jazbec : rethinking monetary - fiscal policy coordination opening remarks by mr bostjan jazbec, governor of bank of slovenia, at the bos - imf high level seminar on rethinking monetary - fiscal policy coordination, portoroz, 19 may 2016. * * * it is a great pleasure to welcome you all to the high - level seminar on “ rethinking monetary - fiscal policy coordination ” organized jointly by the bank of slovenia and international monetary fund. it is a great honour to have a very distinguished gathering of central bank governors, senior officials of governments and international institutions, leading academics and practitioners to discuss a very critical issue that occupies the minds of policy makers in the euro area and elsewhere. the objective of the seminar is to explore current thinking on the roles and coordination of monetary and fiscal policies. the presentations and discussion will focus on three main themes : ( 1 ) the principles and practical experience in the coordination of monetary and fiscal policies ; ( 2 ) fiscal policy implementation in the eu institutional framework and implications for monetary policy ; and ( 3 ) conducting monetary policy when fiscal space is limited. i will now briefly touch on these themes in general terms. policy makers in the euro area face considerable challenges in fostering sustained strong growth, price stability and financial stability. following the onset of the global financial crisis, economic recovery has been slow and growth remains lackluster. inflation is much below the medium - term objective of lower than, but close to 2 percent. for some time now, inflation continually has been weaker than expected and market - based measures of inflation expectations stand at their historical lows. therefore, monetary policy has become increasingly accommodative relying on several non - standard measures and negative interest rate policy. there is broad agreement that in the current setting there are limits to the scope of monetary policy actions and their effectiveness for lifting the eurozone ’ s economy. concerns are mounting that the outlook may be one of a prolonged period of low inflation and low interest rates, which can adversely affect both the real and financial sectors. therefore, many of us have emphasized on numerous occasions that “ monetary policy cannot be the only game in town ”. strong sustainable growth, price stability and financial stability will require a coherent, integrated policy strategy that also includes fiscal and structural policies. the message on the importance of fiscal policy supporting monetary policy is founded on historical precedence. in 1936, prescribing the way out of the