of the euro area economy. moreover, as experience has shown, stable prices minimise the inflation risk premium, thereby lowering long - term interest rates and helping to stimulate investment and growth. in order to maintain price stability, the ecb has designed a monetary policy strategy wherein risks to price stability are assessed on the basis of two pillars. the first pillar assigns a prominent role to monetary developments. the second pillar is a broadly based assessment of a wide range of other economic and financial indicators. this all - encompassing and systematic approach guarantees that the governing council of the ecb takes into consideration all relevant pieces of information when assessing the outlook for price stability in the medium term. all this shows clearly that the ecb needs to focus on the euro area when conducting its monetary policy. focusing on domestic objectives is, in fact, the mandate of all major central banks in the world, and rightly so. i strongly believe that the best contribution that the euro area can make to world economic growth is to ensure macroeconomic stability " at home " by pursuing policies which lead to sustainable non - inflationary growth in the euro area. given the size of the economy of the euro area, a stability - oriented policy will help to create a favourable environment conductive to non - inflationary growth at the global level. the mandate of the ecb is fully consistent with this principle. this is the only reasonable allocation of responsibilities among the large economies in the world. anything else risks blurring such responsibilities and diluting accountability, which would in turn distort incentives in a perverse way. this notwithstanding, the euro area is not, of course, economically speaking, an island and global developments do affect the euro area economy. hence, let me also stress that one of the requirements of a globalised world is a frequent exchange of information and views among policymakers. the ecb currently participates in the meetings of international organisations, such as the international monetary fund ( imf ), the organisation for economic co - operation and development ( oecd ) and the bank for international settlements ( bis ), and different fora, such as the g7. such exchanges are important, among other things, to better understand economic developments and to fully analyse the spillover effects in the economy arising from different policies. the ecb is not in a position to fine tune economic activity in the euro area, as it does not have the instruments to do so. any attempt to do so would prove counterproductive, leading to

and exports. of course, the last leg to all of this is the currency volatility experienced by regional currencies. in fact, we saw, for the first time in this past decade, intervention by some regional central banks that would have been quite unthinkable a year ago. looking ahead, significant downside risk to growth and upside risk to volatility remains. on the growth side, the october imf world economic outlook sees the world economy entering a major downturn. global growth is projected to slow substantially in 2008 and only a modest recovery would begin later in 2009. against this background, key concerns of asian central banks focus on the global economic slowdown, tightened global liquidity, and potential capital outflow. indeed, slower export growth to major advanced economies, and adverse changes in equity market wealth on real consumption, investment, and income will certainly affect export - dependent asian economies. as for financial market volatility going forward, some of the growth projections that came out of various sources, including the degree of volatility in asset and currency markets, would quite easily exceed even the most conservative stress - test scenario that most banks would have carried out six months ago. however, if the experience of asian crisis is anything to go by, one should remain alert to the possibility of a long period of correction and adjustment. moreover, given the global contagion, economies and markets with less structural resiliency, and lacking width and depth and thus liquidity, may eventually encounter dislocations in their real sectors. what does this combination of global slowdown and heightened market volatility mean for banks and financial regulators? ladies and gentlemen, in this scenario, credit risk management would be the priority for banks and regulators, to ensure that going forward, asset quality remains sound, and banks have adequate capital and provision to absorb this risk. indeed, the underlying cause of the present global financial crisis is the lapse in credit culture and credit risk management, which has allowed excessive leveraging and indebtedness. moreover, raising new private capital in this environment is a very tall order ; while the option of public capital injection very costly for shareholders and tax payers. therefore, it is imperative that banks need to be even more vigilant in managing not only their asset quality but also their internal capital, funding, expenditure including executive pay, and dividend policy. looking at banks in the asian region, such as thailand, despite rapid development of capital market