and the central bank ’ s capability of guiding market rates, but also upgrade the effectiveness and transparency of relending management. iii. change the ways of resetting loan rates to guide commercial banks to enhance risk management and make positive reaction to the interest rate changes by central bank with the approval of the state council, the pbc changed the way of resetting loan rates. effective on january 1st, 2004, the ways of resetting loan ( excluding household mortgages ) rates are determined by borrowers and lenders through negotiation. the frequency of resetting rates on medium and long term rmb loans, previously once a year and now determined by borrowers and lenders, can be monthly, quarterly, annual, or fixed. this policy move has corrected the asymmetry between fixed deposit rates and annually changed loan rates. consequently, commercial banks can determine the way of resetting loan rates according to customer ’ s credit rating, and flexibly design loan products. also, shortened resetting intervals help commercial banks spot problems the customer ’ s solvency problem. in addition, when central bank changes benchmark rates, commercial banks can promptly adjust loan rates based on lending agreement, thus mitigating interest rate risk, facilitating the transmission of monetary policy to manufacturing and consumption. the change of loan rates resetting policy forced commercial banks to establish offer system, to factor in credit risk and interest risk when estimating profits, and to set up internal transfer pricing mechanism. iv. speed up the adoption of loan rate floor and deposit rate ceiling policy and urge commercial banks to improve asset / liability management ( alm ) with the control of lending scale and deposit / lending rates, the commercial banks ’ alm only focuses on the ratio of deposit to lendings. interest rate liberalization, nevertheless, requires commercial banks to focus on interest rate risk and capital adequacy ratio. ( i ) loan rates floor management loan rate floor management calls for commercial banks to adjust asset structure with risk pricing. according to a survey on september 2002, less than half of the outstanding commercial bank lendings are fixed rate, while in stock - holding commercial banks, the percentage of fixed rate loans is only 36 %. since the 0. 9 - 1. 7 pp floating range has basically liberalized the lending rates, commercial banks must learn how to price risk. loan pricing must take into account such factors as fund cost, direct and indirect costs, loan taxation cost, loan maturity, loan risk and target profit. fund cost rate

erkki liikanen : is more always better? accountability, and the clarity of message transparency, introductory remarks by mr erkki liikanen, governor of the bank of finland, at the panel discussion " is more always better? transparency, accountability, and the clarity of message ", ecb central bank communications conference, frankfurt am main, 14 november 2017. * * * why do we need transparency? is more always better? there are two basic reasons for transparency in monetary policy : the first is public accountability of central banks. the second reason is better policy effectiveness. anders chydenius, the 18th century finnish clergyman and economist drafted the world ’ s first freedom of information act ( enacted in the kingdom of sweden in 1766 ). this was 98 years after the riksbank was founded. chydenius summarized the connection between transparency and political liberty in the following way : " the liberty of a nation is preserved not only by the laws, but by public information and knowledge as to how they are being administered. " 1 chydenius ’ statement presents the accountability argument for transparency in its simplest and the most forceful way. the rule of law alone is not sufficient for freedom, but the transparency of the use of executive power is also necessary. until a generation ago, central banks were rather secretive organizations, shrouded in a kind of monetary mystique. this started to change in the 1990 ’ s, when the independence of central banks rose to the top of the reform agenda, in order to improve the credibility of monetary policy. as central banks became more independent, it was natural that accountability and transparency had to develop as well. citizens and their political representatives needed to be able to monitor how central banks used their independence. considering the ecb, an important forum for its accountability are the regular hearings of the president of the ecb at the european parliament. these hearings are both a forum of scrutiny and a venue for communication of policy goals and strategies. the accountability framework was strengthened further after the ecb was entrusted with the powers of banking supervision in the euro area. since then, also the chair of the supervisory board appears regularly in the european parliament. beyond the formal accountability requirements, the ecb was the first major central bank to organize regular press conferences after each monetary policy meeting of the governing council. they are not just one - directional communication but enable useful interaction between the press and the president and the vice - president of the ecb. a more recent, but a very important step