central banks in the definition of these measures. let me now focus on the measures taken by public authorities aimed at facilitating the funding activity of banks and their recapitalisation. i will then turn to key challenges going forward that need to be addressed to prevent the reoccurrence of such financial market turbulences in the future. the funding conditions of banks since the onset of the financial turmoil, increased uncertainty, reflected particularly in counterparty risk, has led banks to hoard liquidity. this has resulted in a significant decline of trading in the interbank money markets. however, the dramatic deterioration of confidence that emerged in mid - september led public authorities to take a wide array of measures to support the funding activity of banks. central banks intensified their actions in the interbank money market which were complemented by specific government measures to improve market functioning over longer term maturities. first, the eurosystem and other central banks substantially stepped up their efforts to ensure access to central bank liquidity by solvent banks. let me recall the main measures in this respect. on 8 and 15 october 2008, the eurosystem took in particular the decision to adopt temporarily a fixed - rate tender procedure with full allotment in all refinancing operations, that is operations with maturities of 1 week up to 6 months. these measures increased the intermediation role of the eurosystem and were aimed at reducing banks ’ funding costs which had soared as parts of the money market became dysfunctional. at the same time, longer - term operations are conducted more frequently and at more diversified maturities. these exceptional measures ensure that banks have access to refinancing at longer - term maturities, the market for which has been particularly affected by the turmoil. since december 2007, the ecb has participated in unprecedented joint operations with the us fed and several other central banks to improve us dollar funding conditions by providing us dollar refinancing to its own counterparties against euros or collateral eligible for euro open market operations. in october 2008, the ecb started conducting its us dollar operations as fixed - rate tenders with full allotment and increased the range of maturities. in addition, it entered into a swap agreement with the swiss national bank to facilitate the distribution of swiss franc liquidity to euro area banks. coupled with the sizeable enlargement of the list of assets eligible as collateral, which will remain in place until the end of 2009, these measures have substantially reduced the funding strains

investors began to view investing in emerging markets as not much more risky than investing in their own more familiar industrial country markets. capital flowed freely to finance projects in emerging market countries with lenders demanding only slightly higher interest rates than they would have required to lend at home. but the downside of interdependence is that when something goes wrong, the impact also spreads quickly from one country to another, through trade channels, prices and asset markets. asian countries in trouble quickly cut their imports from each other and from the industrial world. the reduced asian demand for food, oil and raw materials was felt by farmers in the us and canada, australia and new zealand ; by producers of oil in mexico and venezuela, nigeria and russia and the middle east ; by copper producers in chile and exporters of industrial raw materials in africa and elsewhere. companies in rochester and buffalo found their sales falling. as the contagion spread, investments in many emerging market countries began to look less promising. investors became generally more cautious and began looking for safe places to put their money - like buying us government bonds - even at low rates of return. as they saw us companies affected, they became less eager to finance them as well. we ’ ve learned a lot in the last few months about the power of contagious loss of confidence in an interlinked world. the meltdown in russia was the clearest case. russia is not an important economic and trading power in itself. losses to major money center banks, here and in europe, though magnified by unexpected interrelations with hedge funds and other operations, were not in themselves destabilizing. but what apparently mattered was the surprise, both of the suddenness and unpleasantness of the russian default and of the fact that the western “ powers ” were so powerless. no one thought the us and its allies would take the political risk of letting russia fall apart. in the end, there was nothing they could do to stop it. the russian collapse led investors to pull back just about everywhere. some who had borrowed to invest in russia had to sell assets in other markets to cover losses. others simply said to themselves, “ if it can happen in russia, it can happen anywhere ; i had better get my money to a safe place. ” the result was plummeting markets in latin america, south africa, asia and elsewhere, more difficulties for the countries struggling to recover. it is now clear that the asian crisis that started in thailand in the summer