low probability event based upon an outdated distribution. we can all see ourselves as facing a situation in which even the world ’ s leading financial institution in the area of risk management bis central bankers ’ speeches suffers huge material and reputational losses on its derivatives transactions, and in which, while the financial industry is said to have contributed to national welfare through the development of financial engineering we are now instead intellectually besieged by the advances made in it, i. e. where financial engineering dominates the thinking of market participants. a situation is unfolding in which it would be difficult for us to discuss monetary policy in isolation from risk management, and in this sense we can see that an organic relationship between macroprudential policy and monetary policy is in the making. this is also the reason why the central bank must simultaneously worry about both price and financial stability. in a situation in which risk management is being pushed anew as an important undertaking amid a prevalence of information asymmetries, i question whether the conduct of monetary policy using a set of several rules established based upon past economic conditions can be said to be proper and valid. the situation has become such that the impact on monetary policy of the negative burdens placed on the central bank ’ s balance sheet in the course of implementing policies of fiscal dominance cannot be ignored. arguments disputing the effectiveness of inflation targeting policies have been presented by academia. the fact that the first direct trade between the japanese yen and the chinese yuan has now been made also makes those of us accustomed to the dollar reserve currency regime think that there is a possibility of a paradigm shift coming. we can see that the importance of building networks among central banks is growing larger by the day, and the role of central banks too is becoming greatly diversified. it is no stretch to say that it is becoming the norm in many countries now for all of their relevant institutions to cooperate in pursuing their nation ’ s macroeconomic and risk management. a consensus has grown that the overcoming of dynamic economic crises we have never encountered before is difficult to achieve if we stick only to our existing knowledge and practices. under these circumstances, flexibility in our institutional and policy operations is needed, and contemplation and concern to understand new developments demanded. the principle that if all economies are interconnected, then so too must be the pursuit of measures for dealing with this, can be seen as in accord with common sense. the revision of the bank of korea act last year may be taken as having established the conditions enabling us to

juyeol lee : opening address – bok - bis joint conference opening address by mr juyeol lee, governor of the bank of korea, at the bok - bis joint conference, seoul, 19 november 2018. * * * ladies and gentlemen, it is a great pleasure for me to welcome all of you today to this bok - bis joint conference. i would like to express my sincere gratitude to our keynote speaker, dr. emanuel monch, head of research at the deutsche bundesbank, and also to bis general manager agustin carstens and head of research hyun song shin, who will join us tomorrow. let me also thank all of our distinguished moderators, speakers and discussants. in 2016, the bis asian office suggested asia - pacific fixed income markets as a research theme, in recognition of the need to assess the role of such markets and their future development. the bis asian consultative council ( acc ), comprising the central banks in the asia - pacific region, also judged this work as timely and has been actively supporting it through the participation of its researchers. after an interim workshop held in hong kong in september last year, i am pleased that we have reached the final stage where we can share and discuss the results with each other at today ’ s conference. as you probably know, prior to the 1997 asian financial crisis, fixed income markets in the asiapacific region were underdeveloped while financial intermediation depended greatly upon shortterm bank borrowings. in such a case, domestic or external shocks that hinder the smooth rollover of loans can lead to a major crisis – something we learned the hard way. through this lesson, countries in the region have made great efforts to foster sound financial markets that can support stable economic growth. as a result, our region ’ s fixed income markets have developed remarkably : they are now bigger, more liquid, and more open. this fixed income market development in the region has brought about two positive changes. first, it has contributed significantly to the successful transition to interest rate - based monetary policy frameworks. fixed income markets are one of the most important channels through which the effects of policy rate adjustments are transmitted to the real economy. central banks are now able to assess market expectations more quickly by analyzing bond yields for different maturities, making their policies more effective. second, with greater bond investment from abroad, foreign capital is flowing in more diverse ways. it used to come in mostly through short - term bank borrowings or