##er may not repay a loan. prudent lending standards — like securing good collateral and identifying credit - worthy borrowers — can help mitigate that risk. here is another example. a depositor may use a bank account to hold, transfer, or obscure the proceeds of a crime. this is more difficult to determine, especially when deposits are received from half way around the world. third - party service providers and customers are examples of risks from outside the bank that are unavoidable in the ordinary course of business. these third - party risks are not purely hypothetical. they featured in recent cases of attacks on the global correspondent banking network. my colleague richard dzina runs fedwire®, the payments system that i mentioned earlier. here is how he described some of the risk that he faces : historically, and understandably, market infrastructures have operated on the presumption that endpoint security is principally the responsibility of the endpoint, and infrastructure security is principally the responsibility of the operator. increasingly, reflecting the elevated cyber threat landscape, this distinction is not so clear, especially as endpoint security breaches can potentially have implications for public confidence in the network as a whole, even in circumstances when the operator ’ s infrastructure, applications, and security perimeter have not been compromised. 3 3 / 7 bis central bankers'speeches i also worry that some risk management practices can themselves create risk. advances in technology have enabled more sophisticated economic modeling, on which many financial institutions rely to assess and manage their risk. this can, unfortunately, lead a bank to conclude that it has reduced one set of risks and can therefore afford to take on an additional set of risks. but what if the technology was imperfect, and the sophisticated models were flawed? overconfidence in risk models can itself become a significant risk. risk and responsibility there is a popular phrase in the united states among risk management professionals who want to be clear about accountability for risk. we often say that a person, or division, or firm “ owns the risk. ” let me explain what i think that phrase means, at least in some contexts. when a business line manager understands that she “ owns the risk ” — and not, say, the lawyers, compliance professionals, or anyone else — it means that she is accountable to a more senior manager and to the firm for the risk. presumably, that means she will bring an appropriate focus and attention to issues of risk management. she will not assume that risk management is somebody else ’

david klein : coping with the challenge to reduce poverty speech by mr david klein, governor of the bank of israel, at the imf / world bank annual meeting, dubai, 23 september 2003. * * * mr. chairman, mr. kohler, managing director of the imf, mr. wolfensohn, president of the world bank group distinguished governors, delegates, ladies and gentlemen, the world recognized the need to give priority to the global poverty problem, and expressed a wide consensus on this matter in the millennium development goals. let me devote my statement today to this subject, and say a few words on the challenges facing israel in its efforts to reduce poverty. we believe that poverty cannot be tackled effectively if policy is not focusing on growth. growth is not a sufficient condition for reduction of poverty, but it is, at one and the same time, the highway to raise the living standards of those who are able to work, and the provider of resources to support those who are unable to help themselves. we also believe that in order to realize its potential growth, the israeli economy - perhaps like some other small and medium - sized economies - has to be open to free movement of goods, services and capital, and to adhere to international standards of macro - economic management, including the standards for fiscal deficit and price stability. such a framework maximizes israel ’ s potential contribution to science and technology as a major vehicle of growth through international trade. however, this approach also requires to make our tax regime competitive with that of other countries, which necessarily means to commensurately reduce government expenditures to keep a lid on its debt. therefore, the macro economic framework constrains the room to handle the challenge of reducing poverty by just increasing welfare payments. when we come to formulate an alternative strategy, we rely on the experience and advice of the world bank and the imf and the policies of other countries, like those adopted by the european union. one fundamental element in our strategy consists of various reforms in the labor market leading to an increase in the ratio of employed persons in the working age population. this is one dimension in which we lag behind the developed world. i need not elaborate here on the significant relation between the rate of employment and the incidence of poverty. a second key element in our strategy is targeting of the policy to reduce poverty. like some other countries, we have a history of increasing welfare payments without making a distinction between those who are able, or unable, to work,