further. i would like just to point out that at the ecb we believe that our monetary policy strategy – with its medium - term orientation for the definition of price stability and the explicit introduction of money - and credit - related considerations into the policy decisions - ensures that longer - term risks to price stability, which emanate from evolving financial imbalances, are not overlooked in the assessment of risks to medium - term price stability. at the same time, the empirical link between monetary developments and evolving imbalances in asset and credit markets implies that the money pillar can help to detect these imbalances at an early stage, providing for a timely and forward - looking response to any risks to financial and macroeconomic stability. iv. conclusions let me now conclude. the future of the banking sector in the post - crisis macroeconomic and financial environment is an issue of crucial importance for our economic welfare, given the fundamental role played by banks in most european countries. this is why it is important to stress that there is still much work to be done before we can exit from the crisis. bis central bankers ’ speeches in an economic and financial context which is still fragile, the adjustment towards a “ new normal ” continues posing important challenges and needs. it is essential that we continue making progress in reforming both the microprudential and macroprudential regulatory and supervisory framework. at the same time, the banking sector must continue addressing with perseverance, rapidity and determination the vulnerabilities in strategies and business practices of individual institutions revealed by the crisis. this is the only way in which the banking sector will become part of the solution to the problems that still represent obstacles to economic growth and employment creation. bis central bankers ’ speeches

taught us that assessing systemic risk is key, as are sound arrangements for the application of tools to mitigate it. the final crossroads is faced by economic policy, as a result of the changes i have described. in short, it can be said that the tasks at hand are shifting from the achievement of stability to promoting growth, and from crisis management to longer - term development. in terms of monetary policy, this can be seen in the monetary policy committee ’ s shift of its bias from monetary easing to neutral. this does not mean that interest rates cannot be lowered further, but it does mean that because inflation appears to have hit bottom, economic recovery has begun, and the effective policy rate is closer to equilibrium than before, it is not as clear what direction upcoming interest rate decisions will take. the next steps will be determined more by the newest indicators of economic developments and prospects than they have been in the recent past. at its next meeting, the monetary policy committee will probably assess whether and how the icesave referendum results and the newly published capital account liberalisation strategy will affect monetary policy in the near future. the strategy divides liberalisation into two main phases, with phase i dedicated to unwinding offshore krona positions by allowing owners to exit through auctions or by investing in the icelandic economy. only when these measures have generated acceptable results can controls on residents ’ capital outflows be lifted. if conditions are right, the latter phase could proceed relatively quickly, but if not, it will be executed more gradually. it is difficult to say how long phase i will take, as its duration will depend on a number of uncertainties, such as access to foreign credit markets. but it is important for near - term monetary policy that phase i be designed to minimise potential negative effects on the exchange rate and the foreign exchange reserves, at least at first. it is only in phase ii that the interest rate differential with other countries begins to assume much greater importance as regards exchange rate developments. in the recent past, monetary policy has been an element in the larger economic policy formulated by the icelandic authorities in co - operation with the international monetary fund. the key features of that policy have been exchange rate stability, fiscal sustainability, and financial system reconstruction. in spite of delays in execution, the programme has, on the whole, been very successful. our collaboration with the imf according to the current economic programme will conclude in august, but of course, our long - standing co - operative relationship with the fund