##ance ” – but without being predicated on the fallacious assumption that regulators will always know best. we need policies that steer away from a retreat to the financial repression of the 1940s and 1950s, but that have a more sceptical view of the latest financial innovations, and in particular maintain a much greater degree of distrust of leverage, in all its forms. and we need a system that is more robust in the face of occasional financial failures. this is a challenge, of course, for financial institutions, prudential supervisors and those responsible for seeking to maintain overall system stability alike. indeed, these two perspectives have to be married more effectively than they have been to date. assumptions reasonably made at the level of the individual institution when assessing prudential strength – say, about the availability and liquidity of various markets – may turn out to be collectively invalid. in the case of central banks, surely we cannot avoid another look at the question of monetary policy, asset prices and leverage. this has been a long running debate – going at least as far back as the early 1990s, in my memory. distinguished scholars have disagreed on the extent to which monetary policy should respond to movements in asset prices over and above their estimated impact on inflation via wealth channels, etc. some argue in favour of “ leaning into the wind ” of asset price swings, 1 while others eschew that on various grounds, in favour of dealing with the aftermath of asset price busts if and when they occur. several chapters have been written in the story, the most recently completed one being in the early 2000s after the “ dot. com ” boom and bust. i think it could be said that, at that time, those advocating leaning into the wind did not get enough traction – i suspect mainly because growth in the united states was fairly easily restarted after the shallow recession of 2001 that followed the “ dot. com ” bust. in the aftermath of the excesses of the subsequent period, a new chapter is now being written in this discussion. knowing the next speaker, bill white, as i do, there will probably be food for thought on the topic here today. see sg cecchetti, h genberg, j lipsky and sb wadhwani ( 2000 ), asset prices and central bank policy, geneva reports on the world economy no 2, international center for monetary and banking studies and centre for economic policy research, geneva.

central bank of kenya 7th kenya bankers association annual banking conference thursday, september 27, 2018 keynote address by dr. patrick njoroge, governor, central bank of kenya as prepared for delivery good morning! i want to begin by thanking the kenya bankers association ( kba ) for inviting me to speak at this auspicious annual banking conference. i applaud kba for organizing this conference for the last seven years, and contributing to thought leadership on topical banking sector issues. the theme of the conference ‘ ‘ credit market dynamics in an evolving regulatory and market participants ’ environment ’ ’ is quite apt given the conjuncture — where the global, regional and national financial markets are today. for instance, in kenya, there has been considerable discourse recently on the cost and availability of credit. the discussion is now morphing to the potential role of disruptive non - traditional credit providers that leverage on technology, but discussions about consumer protection in these new environments has not gathered much steam. however, i am informed that these issues will be discussed during the conference and i look forward to the findings. the year 2018 has been a year of anniversaries. on august 7, we marked twenty years since the bombing of the american embassy in nairobi, just a few steps away from the central bank building. and just a few days ago, on the 21st of september, we marked the fifth anniversary of the westgate attack. both of these were tragedies, marked with sombre reflections by our fellow citizens. we marked another recent anniversary that is less familiar to many ordinary kenyans, but one that is felt acutely by practitioners in the financial sector. ten years ago, on september 15, 2008, the storm that had been brewing for a year finally broke. lehman brothers, a company that had been in existence for one hundred and fifty eight years, shut its doors. ordinarily, companies come and go. after all, creative destruction is the mantra of the day and only the fittest survive. new blood, new ideas and new companies are essential to the health of capitalism, and, conversely, old ideas and old companies must be discarded when the time comes. but, of course, lehman was different. the canary in the coal mine was dead. the deluge was upon us. the effects of the global financial crisis were deep, powerful and lasting. some are being felt to this very day. the ordinary citizen — wanjiku — may not give you the precise details of what