markets have been stable on the whole as the bank has been providing ample liquidity. in capital markets, stock prices have risen considerably and long - term interest rates have risen, as market participants ’ pessimistic view of the outlook for the economy and prices has subsided slightly across the world. in corporate finance, the fund - raising environment continues to be easy on the whole. however, the environment for firms with relatively high credit risk remains severe. ii. conduct of monetary policy it has been three months since i presented my previous statement regarding the semiannual report on currency and monetary control. since then, the bank has implemented monetary policy measures governor fukui made almost the same statement regarding the semiannual report on currency and monetary control for the second half of fiscal 2002 before the committee on financial affairs, house of representatives, on july 16, 2003. in a timely manner against the background of increasing uncertainty about the outlook for the japanese economy. at the monetary policy meeting on april 30, 2003, the target for the outstanding balance of current accounts held at the bank was raised by 5 trillion yen. at that time, there was still considerable uncertainty about the prospects for recovery in the u. s. and european economies and the impact of sars was a matter of concern for east asian economies. on the financial side, stock prices in japan, especially for bank stocks, remained weak and volatile. taking account of this increasing economic and financial uncertainty, the bank decided to raise the target for the outstanding balance of current accounts to maintain financial market stability and thereby strengthen support for economic recovery. in the middle of may 2003, the bank implemented further policy measures to provide support from the financial side after the emergence of problems at resona bank. the bank decided to provide liquidity to resona bank when necessary, including loans pursuant to article 38 of the bank of japan law, which do not require submission of collateral. furthermore, regarding its money market operations, the bank decided to further raise its target for the outstanding balance of current accounts by 3 trillion yen to ensure an ample provision of funds. this reflected greater uncertainty about the outlook for the japanese economy due partly to instability in the stock and foreign exchange markets, in addition to uncertainty about overseas economies. with such significant uncertainties, the risk of further instability in financial markets adversely affecting economic activity was a cause for concern. however, owing to the timely implementation of a series of measures by the bank, overall conditions in financial markets have remained calm and no

one of the advantages of the ssm is that it will draw on a broader and better basis of information on euro area banks. this implies that we will be able to uncover trends in individual business lines and risk management much sooner in the future. that will make it possible to reveal undesirable developments more quickly. i also expect the establishment of the ssm to be a major step forward with respect to a consistent application of supervisory rules. furthermore, i hope that european supervision, involving teams of supervisors from various nations, will provide a new paradigm that incorporates the best elements of each nation ’ s approach to supervision. this new approach will leave no room for a “ home - biased ” supervisory regime. the new responsibilities of the ssm must be subject to democratic accountability. based on the ssm regulation, the interinstitutional agreement provides for a strong framework for accountability vis - a - vis the european parliament, and i believe it to be of utmost importance to ensure a trustful relationship between our two institutions. today, we provided you with the first quarterly report on the ssm, and daniele nouy will discuss it here in strasbourg tomorrow. honourable members, i have only mentioned two of the aspects that we are currently dealing with in preparation of our new supervisory tasks. much could be added with respect to data reporting, staffing, the it infrastructure, the legal framework, supervisory fees and many other issues. however, bis central bankers ’ speeches allow me instead to closing with a remark on a different but related topic – banking resolution. adding a true single resolution mechanism ( srm ) to a single supervisory mechanism is, in my opinion, indispensable. the banking union must stand tall and strong on both these pillars to be resilient. in order to achieve a balance between liability and control, a crossborder supervisory structure needs to be complemented by a common regime for restructuring and resolution. i hope that the legislative process will be completed in good time to allow the srm to become operational by the end of this year. on substance, i believe we need an efficient decision - making process that ensures that effective resolution action can be taken. i also believe that only a truly single resolution fund ( srf ) with a fiscally neutral backstop, together with risk sensitive rules for capital requirements, as well as a tough banking supervisor, can successfully break the sovereign - bank nexus that has affected the banking sector negatively during the crisis. in order not to create