it does not mean all investors have to be treated in exactly the same way in the process of making investments. in other words, the hkma agrees that private banking and retail banking clients can and should be treated differently in the investment process. this being the case, we need to have a clear and practical definition of “ private banking customer ”. after consulting the industry and the sfc, the hkma is minded to agree that a “ private banking customer ” can be defined as a customer with either ( a ) at least us $ 1 million of assets under the management ( aum ) with the bank concerned or ( b ) total investable assets of at least us $ 3 million. this is an expanded definition to cater for the operational needs of private banks. once we have defined who qualifies as a “ private banking customer ”, the next step is to consider specific measures that would help make private banking more “ user friendly ” without compromising the need to accord appropriate protection to private banking customers. first of all, let ’ s talk about suitability assessment. the hkma agrees that private banks need not mechanically match their client ’ s overall risk tolerance level to product risk level. this is because in private banking, customers often look to their private bankers for investment advice on a continuous basis having regard to the customers ’ entire portfolios or balance sheets. this is quite different from the retail end of the market in which one - off sales transactions are common. we therefore consider that suitability assessment for private banking customers can be conducted on a holistic or portfolio basis, taking into account all the relevant circumstances of the customers. for example, as long as the portfolio allocation and the overall risk level agreed with the client is adhered to, a low or medium risk tolerance client buying high risk products that only constitute a minor proportion of his portfolio is not necessarily a “ mismatch ”. the same principle applies to some other aspects like investment tenor and concentration risk of aum with any individual private bank because the entire portfolio of the customer will be taken into account. also, we agree that the documentation of rationale for recommendations need not be on a per transaction basis. it can be done on a portfolio level at the outset, subject to some conditions being met. these conditions include the preparation of an investment mandate stipulating the types, risks and allocation of investments after taking into account all relevant circumstances of the client. the investment mandate should be explained to and agreed by the client, and

, and in the meantime the government can make its efforts for fiscal consolidation. e. overcoming deflation and the bank ’ s response the next topic concerns what policy response the bank might take when we see the overcoming of deflation start to have an effect on long - term interest rates. after the success of the qqe, people ’ s medium - to long - term inflation expectations will be anchored at around 2 percent, and the bank might possibly start moving toward an exit. market participants will notice signs of change in economic activity and monetary policy. under those circumstances, nominal long - term rates might start to adjust, well before the actual changes in policy. from a purely macroeconomic perspective, a change in nominal rates can be considered as the result of a change in people ’ s inflation expectations. such a change may not be detrimental as long as real rates remain more or less the same. more optimistically, a higher tax revenue after the overcoming of deflation can be expected, and that will improve the fiscal situation. from a pessimistic viewpoint, an abrupt change in nominal rates might make the fiscal situation severer and possibly have an effect on the financial system. somewhat ironically, the success in overcoming deflation might produce unfavorable spillover effects, given the significant size of the government ’ s debts. in an extreme case where there is a grave negative impact on financial stability, a central bank might have to choose either financial stability or price stability, no matter how strongly it is committed to price stability. once a central bank can no longer pursue price stability in fear of fiscal sustainability, it might fall into a situation, known as “ unpleasant monetarist arithmetic ”. 2 see sargent and wallace ( 1981 ) for details regarding “ unpleasant monetarist arithmetic ”. bis central bankers ’ speeches in my view, we must avoid such a pessimistic scenario from unfolding. to that end, the bank has been stress - testing the robustness of japan ’ s financial system, taking into account possible changes in the interest rate environment. furthermore, it has urged financial institutions to reinforce their risk management and take measures to enhance profitability. in terms of its relationship with the government, the bank pursues monetary policy to achieve the 2 percent price stability target. that includes the process through which it will eventually exit from the current easing policy. we simply cannot accept a situation in which a monetary policy decision is affected by the consideration of fiscal policy. there is no question about it