foreign currency liquidity it provided to tackle the crisis. however, the bank has maintained its base rate at the low level of 2 percent, in consideration of the high degree of uncertainty at home and abroad. my dear colleagues, the korean economy is expected to post much stronger growth this year than it did last, despite weakening of the expansionary policy effects, as private sector growth momentum strengthens led mainly by consumption and investment. uncertainties surrounding the korean economy ’ s growth path still exist, however, given the possibilities of delayed recoveries in advanced countries, of a recurrence of global financial market unrest, and of hikes in oil prices. prices are forecast to remain stable on the whole, but may face growing upward pressures from the second half on. while the korean economy is expected to do better overall this year than last, there are many tasks yet to be carried out if we are to fully escape the influence of the crisis and return our economy onto a firm track of growth. first, in implementing macro - economic policy, priority should be placed upon ensuring that the economic recovery is on a solid footing. in micro terms, our policy efforts need to concentrate on solving the problem of stagnant employment that has worsened significantly since the crisis. efforts should be redoubled to increase the growth potential of the national economy, from a medium - and long - term perspective, by actively nurturing the engines of future growth and enhancing the quality of the services industry. together with this, it is necessary to further strengthen the economy ’ s capacity for absorbing external shocks, applying the valuable lessons learned from the recent global financial crisis. to ensure efficient discharge of the financial stabilization duty, reasonable role - sharing and close cooperation between the government, the supervisory authorities and the central bank are essential. improvement and modification of the relevant systems must be carried out to achieve this. close attention should also be paid to the movements of household debt and asset prices, to prevent the excessive credit expansion and consequent asset market bubbles that have been major triggers of financial crises in developed markets. to improve economic health, continuous restructuring in every sector of the economy is also important. with korea taking on the role of g - 20 chair nation this year, full exercise of our leadership is essential, to help find reasonable solutions to current global economic concerns, including preventing recurrence of another financial crisis. my dear colleagues, i would like to talk now about the tasks the bank of korea should place its greatest emphasis on this year.

the quality and quantity of bank capital in order to better absorb future shocks. they also suggest introducing a bank leverage ratio, although this will have different effects in the us and the eu unless there is convergence in accounting standards. more generally, there is agreement on the need to require banks to build - up countercyclical buffers in good times that can be drawn down during bad times. in addition, the basel committee and the cebs ( committee of european banking supervisors ) are developing new standards for liquidity. the european union has also enhanced its macro - prudential framework by creating the european systemic risk board, with responsibility for issuing early warnings and recommendations. the second lesson was that incentives need to be aligned on creating long - term value rather than short - term profits. the final lesson of the crisis was that it clearly revealed the need to improve cooperation in surveillance and oversight. this requires better links between the two pillars of financial supervision : the micro approach, which focuses on individual institutions, and the macro approach, which focuses on systemic risk. 2. 3 new ideas to prepare for the future i have described the immediate challenges linked to exit strategies and the longer - term process of financial reform that is already underway. let me now comment on some new ideas advanced in the wake of the crisis to prepare for the future. in a financial times column entitled “ how to save banks without using taxpayers ’ money ” professors wolff and vermaelen describe a financial instrument called contingent convertibles ( also known as coco bonds ). in the recent crisis, these could have helped distressed institutions to convert debt to equity, reducing the need for capital injections from the state. the advantage of contingent convertibles is that they would not require a negotiated decision by the firm or an intervention by the authorities, but would convert debt to equity automatically when the value of equity falls below a level specified in advance. the process appears to be transparent, predictable and dictated by market developments. professors wolff and vermaelen add a twist by providing the original shareholders with a call option to buy back the converted debt. this serves to smooth the conversion process and avoids an incentive problem that can create so - called “ death spirals. ” i expect professor vermaelen, who will speak next, will provide more details. turning to other “ new ideas, ” the “ tobin ” tax on financial transactions reappeared in the recent policy debate to finance the cost of future bailouts. this is an old idea dressed up in new