if signaling is the primary channel through which large - scale asset purchases act, there remains much that we don ’ t understand about how to calibrate such operations. in any event, it will be important that the signals conveyed by balance sheet policies are consistent with the forward guidance about future interest rate policies. this has been a difficult communications challenge at times for the fomc. and it will likely remain a communications challenge as the committee coordinates the unwinding of the fed ’ s balance sheet with the gradual increase in the policy rate. implementing forward guidance i have indicated conceptually why a systematic approach to communications is important but have yet to discuss how a central bank might implement such an approach. this issue has received increased attention in recent years, with various central banks adopting different strategies. the differences are based on alternative economic viewpoints as well as on varying institutional structures. i think the fed can learn a great deal from the various approaches. many of you in this room are very knowledgeable, and have thought deeply about the costs and benefits of the various approaches. a forecast is, of course, a critical piece of information emanating from the central bank, and the nature of the policy rate ’ s future path is an important element of that forecast. these forecasts are often presented and discussed by central banks in the form of published inflation or monetary policy reports. such reports can and should be an important element of a central bank ’ s communication and transparency about the policy process. but a number of interesting questions arise. should a central bank ’ s published forecast be based on its assessment of what the policy rate path is likely to be, or should the forecast be based on an interest rate path that is more arbitrary, such as a constant interest rate path or one that is related to market expectations? i am fully aware that great care needs to be taken in providing more specific forms of forward guidance. we must avoid a false sense of certainty regarding future policy or a mistaken sense of commitment to a specific path of policy rates. yet, i believe there are approaches, like the one i am about to suggest, that can avoid or mitigate these pitfalls. because i believe systematic monetary policymaking can enhance economic performance, i am in favor of clearer communication concerning the formulation of policy. now, in our stylized models, there tends to be a single monetary policymaker who knows the structure of the economy. therefore, the approach for communication would be a forecast derived from the policymaker ’ s model

. those considered too important to fail due to their size, the level of complexity of their operations or their interconnectedness with other financial system participants. in future, these banks will have to meet greater regulatory and supervisory demands, which will need to be adapted to the type of activity, complexity and structure of each bank. headway has been made and is being made in many other areas, such as remuneration in the financial sector, the regulation of rating agencies, etc. generally speaking, spain has much to learn from other countries about economic policies. the clearest and most pressing example, in light of the economic and social consequences of the burgeoning number of jobless spaniards, is the employment and labour market policies of those countries which, even at the height of crises, keep unemployment rates low. however, within the realm of financial regulation and supervision policies, the opposite is the case : our supervisory arrangements are being closely studied for reforms in other countries. the ingenious idea of governor rojo and his team to set in place a countercyclical mechanism in order to try and soften credit growth or at least mitigate the adverse consequences of its cyclical behaviour on the banking system was a forerunner of the countercyclical capital buffers envisaged in the basel iii accord. the constraints on complex products and the obligation to consolidate are further examples of rules or guidelines that are characteristic of spanish banking supervision and regulation and which fully coincide with the direction in which global financial system reform is advancing. spain ’ s approach to restructuring its banking sector has demonstrable advantages. the process has been undertaken using the frob ( fund for the orderly restructuring of the banking sector ), which was set up following parliamentary approval over 18 months ago and has since overseen numerous integration processes between savings banks that have reduced their number from 45 to 17. the design of the frob was based around a twopronged approach. first, it was geared to supporting banks which, while viable, required restructuring to ensure their ability to resume a path of sustainable profitability, by reinforcing their solvency with public funds. significantly, in certain countries where the need for a similar instrument has been acknowledged, this has not yet been created. second, the frob involved giving the banco de espana wide - ranging powers to swiftly and effectively take control and resolve the problems of those banks that are not viable. rounding off the remit of the frob has been the approval of the reform of the legal