diego, california, 17 july 2001. ( also published in bis review no 65, 17 july 2001 ). equity insurance which were put in place prior to the 1987 equity correction, and ( more recently ) the increasing use of vars ( value - at - risk models ) and various risk management procedures which will tend to ensure correlation of changes of opinion ( the herd changes direction simultaneously ) and of mistakes. all this is happening in a world of enormously increased capital flows. in this world, it will be surprising if we are not asked whether monetary policy can make a bigger contribution to maintaining financial stability. the obvious place to start would be with asset prices. asset prices already have some role in inflation targeting, in as far as they impinge on the prospect for cpi inflation. but looking at the experience of japan during the 1980s ( and perhaps the united states more recently ), it might be asked whether monetary policy should do more to directly influence asset prices which ( in the case of japan ) were a central cause of financial instability and the subsequent decade - long stagnation. asset ” bubbles ” are clearly enormously disruptive : the issue in debate is not the desirability of minimising them, but whether they can be identified beforehand and whether the instrument available is suited to the task. without a clear mandate to do this, and an analytical framework for identifying a bubble, it would be a bold central bank which deliberately set out to burst the bubble, knowing that many in the economy were enjoying the euphoria. how are these issues to be resolved? one hopes that the answer is : with analytical and intellectual endeavour ; and with common sense not coloured or distorted by dogma. given the importance of the issues at stake, it seems unlikely that the history of monetary policy has ended, with no further evolution likely or possible.

and npa in september 2011. the charges alleged conspiracy to offer to pay, or pay, a benefit to a foreign official not legitimately due, in a total of four foreign jurisdictions. malaysia ( october 2001 – december 2003, both npa and securency ), indonesia ( december 1999 – february 2001, both npa and securency ), vietnam ( january 2001 – september 2004, securency only ) and nepal ( february 2000 – may 2002, npa only, with no individuals as yet charged over nepal ). at the time of writing, matters remain before the courts. what has been done at the companies? while this is perhaps not really a question for today, it is worth recounting what steps have been taken to strengthen arrangements at both companies. i outlined in july 2011 a number of these. of course the persons charged with wrongdoing are no longer with either company. the use of foreign sales agents at npa ceased in 2007 as a result of the npa audit at that time. npa these days operates under a tighter charter to keep its focus more closely aligned with the bank ’ s core objectives and risk tolerance. the bank has changed the composition of the board. npa ’ s principal focus over the years ahead will include the production, later this decade, of a series of upgraded banknotes for australia. in the case of securency, the use of sales agents was also discontinued after the kpmg report. policies were overhauled as recommended in that report. we have also, as you know, announced our intention to exit our shareholding in securency. both companies are of course continuing to cooperate with the authorities in resolving the issues. the bank has continued to give a good deal of thought to its overall governance of the two companies. the reserve bank board has had discussion on these issues over the past year or so, and has benefited from advice from external experts on corporate governance. i am of course happy to provide any further information that the committee may wish on these matters. that concludes my opening remarks. bis central bankers ’ speeches