, i will begin my remarks with a discussion of financial markets and how a lack of transparency has contributed to the market dislocations that we have seen recently. i will then return to a theme i spoke about when i was last here – the importance of strengthening our international financial institutions and increasing the transparency of their advice and operations. finally, i'll say a few words about the health of the canadian economy. financial markets : the need for transparency let me begin my remarks by recalling the 2005 - 06 period, when many central bankers – including me – were becoming concerned with what appeared to be an excessive easing of credit conditions, or what was described as a " wall of liquidity " building up around the globe. what was creating this wall of liquidity? well, as i mentioned the last time i was here, at its very base was a global excess of desired savings relative to desired investment. these excess savings were acting to drive down real longer - term interest rates, even during a time when many central bankers were raising policy interest rates. as longer - term interest rates declined, investors intensified their search for better returns. this search for yield led to a narrowing of spreads on risky assets. as well, there was a loosening of lending standards in some markets, as lenders became more willing to take on risk. it also provided the opportunity for an increase in the issuance of structured products. packaging and selling loans with a structure that allowed higher - risk assets to take on the qualities of a lower - risk loan fuelled the demand for higher - risk assets and embedded significant leverage. this financial engineering was a factor that spurred merger and acquisition activity, including corporate takeovers by private equity firms, as well as lending in markets such as the market for subprime mortgages in the united states. in many cases, these structured products have become increasingly complex and more difficult for investors to understand. the securities often made use of leverage and contained layers of derivatives on top of various types of assets ; assets that were packaged and repackaged, sold and resold, in a myriad of forms. in this complex process, transparency about the underlying credit was often lost. because the originators of the loans intended to securitize them rather than leaving them on their balance sheets, they lacked the incentives to carefully assess the creditworthiness of the borrower. and investors often lacked the ability, or did not make the effort, to see through the complexity of the instrument. thus

##its sponsored by canada's major banks. these banks have agreed to provide global - style liquidity support to their conduits. but they have not been immune to both global and local problems. as a result, the banks'conduits have been rolling over at shorter terms and higher interest rates and, in some instances, the banks have been taking some maturing paper onto their balance sheets. nevertheless, the major banks appear to be well placed to deal with the current dislocations. in a joint statement last month, these institutions said that their commitment to support the abcp market is underpinned by the strength of their financial positions, their confidence in the underlying assets, and their ongoing commitment to provide liquidity for their conduits upon maturity. further, data published by canada's superintendent of financial institutions show that our domestic banking sector is well capitalized. at the bank of canada, we welcomed this effort to help re - establish well - functioning money markets in canada. and we are confident that our banks have the capacity to continue to support their conduits as necessary. institutional transparency i said earlier that one of the lessons of the events of august is the absolute importance of transparency if debt markets are to function properly. but the importance of transparency is not limited to money markets and debt instruments. in my view, there is a clear case for transparency more generally in the operation of all financial markets. in most countries there are fairly clear rules requiring transparency in the operation of mutual funds, so investors can tell what they are purchasing. hedge funds, by their nature, are less transparent. but there is also, i believe, a clear case for increased transparency, at least with respect to their objectives, operating procedures, and governance. the objective of accounting standards is also to increase transparency. but it is very difficult for firms to put a precise value on complex instruments for reporting purposes. for many of these instruments, there is no well - established market against which they can be marked. and the models against which these instruments are valued are simply that – statistical models that can only generate estimates of value within what is often a wide range. this means that it is very important for firms to be transparent about the methods used to estimate values and about the range of possible values around these estimates. let me now say just a few words about the importance of transparency in governmentsponsored institutions, whether domestic or international. i will begin with a few words about sovereign wealth funds,