that any further improvement will need to strike the right balance between, on the one hand, efficiently addressing global liquidity shocks and, on the other, avoiding moral hazard and respecting the mandate of individual institutions. during the financial crisis, swap lines among major central banks played a pivotal role in easing the funding pressure of banks. empirical evidence and anecdotal feedback suggest that market participants see them as a useful safety net, also in times of limited usage. while swap agreements have so far been set up with a high level of urgency, it is worth considering a framework of permanent stand - by swap lines. there are important limitations, however. such a framework should not constrain the monetary policy and operational frameworks of participating central banks. even more importantly, the establishment of global financial safety nets should not lead countries, or financial institutions, to engage in overly risky strategies. see obstfeld, m. “ the international monetary system : living with asymmetry ”, november 2011, http : / / www. nber. org / chapters / c12596. pdf see pickford, s. “ global financial safety net ”. chatham house international economics brief. ie bp 2011 / 02. bis central bankers ’ speeches 3. reaping the full benefits of international financial integration at a deeper level, global financial safety nets cannot be a substitute for a more resilient and better functioning global financial system. let me mention a few avenues for reflection. first, the global financial system should adapt to an increasingly multi - polar international monetary system. various initiatives have been taken by chinese authorities to promote the renminbi ’ s international role. its use by market participants has already increased, particularly as a currency for international trade invoicing and, more recently, as a currency for international issuance, deposit and selected official investments. such initiatives should be increasingly reflected in market infrastructures. second, global financial safety nets are temporary instruments – and as we all know, temporary measures often risk becoming permanent. measures aimed at addressing liquidity crises should not weaken policymakers and market participants ’ incentives to address financial market malfunctioning in a more durable manner. let me give an example : in the euro area, the ecb has extended liquidity to banks faced with temporary funding difficulties, provided they are financially sound and can post adequate collateral, but the ecb should not act as a substitute to euro area capital markets on a durable basis. this is all the more important as shocks to

of the euro area. also, at a regional level outside europe, progress is ongoing in asia towards strengthening the asian financial safety net, known as the chiang mai initiative multilateralisation ( cmim ), with the doubling of the cmim fund to usd 240 billion. in parallel, important steps have been taken to mitigate the spreading of risks within a highly interconnected global financial system, making it more resilient to unexpected events : bis central bankers ’ speeches systemically important financial institutions, which contribute to the spreading of risks given their high level of interconnectedness, will be subject to stricter capital requirements under the basel iii agreement ; financial infrastructures have been made more resilient. first, the financial stability board is working on safeguards aimed at promoting global clearing in order to facilitate access to, and the use of, global clearing houses. second, regulators and overseers have just finalised a new set of regulatory principles for financial market infrastructures aimed at ensuring that any such infrastructures, whether domestic or global, will be better able to withstand shocks and unforeseen events. moreover, regulators and overseers are required to adopt regimes for effective cooperation with each other. 2. further improvements to global financial stability nets while all these measures have undoubtedly made an important contribution to stabilising the global economy, many observers have argued that gaps remain in the current global financial safety nets. existing mechanisms for dealing with crises have been seen as being deficient in three respects : ( i ) insufficient amount of financial fire - power ; ( ii ) insufficiently flexible or fast decision - making and ( iii ) insufficient coordination with respect to both financing and surveillance. these deficiencies have been seen as leading countries to increase their foreign exchange reserve holdings. for the holders, the great attraction of reserves is that they provide instantaneous and unconditional liquidity. however, the accumulation of a large stock of reserves is not only based on precautionary motives. moreover, even at the level of the individual holder, there are downsides as reserves come with a quasi - fiscal cost. 1 how can we go forward and what can be done differently? overall, there is widespread agreement about what a global mechanism should do : ( i ) reduce the demand for selfinsurance through reserves accumulation ; ( ii ) provide fast - disbursing financial assistance in large amounts to the “ innocent bystanders ” ; and ( iii ) reduce global imbalances. 2 however, it is clear