, i have described the bank's thinking regarding the conduct of monetary policy in terms of interest rate policy. now, let me remind you of an important fact : proper functioning of financial markets is a prerequisite for monetary policy to be effective. it is therefore vital to ensure the stability of japanese financial markets when global financial markets remain volatile. fortunately, japanese financial markets have so far been stable unlike their u. s. and european counterparts. mainly this is because japanese financial institutions have had only limited exposure to subprime - related products, but i believe that a considerable role was also played by the fact that the bank, based on its past experience of financial crises, had already established a framework for flexibly providing liquidity. as you know, since last summer central banks in north america and europe have introduced various tools for liquidity provision to address elevated pressures in short - term funding markets. for example, the fed has extended the maximum maturity of its funds - supplying operations to one month, from two weeks. the bank employs funds - supplying tools with a variety of maturities – some of which have a maximum maturity of one year – and this enables the bank to provide funds with the appropriate maturity. in march this year, the fed introduced a credit facility that allows securities companies to borrow funds. the bank has included securities companies as counterparties since 2001, when it introduced a complementary lending facility. as for collateral, central banks in north america and europe have recently expanded the range of eligible collateral they accept, while the bank has long accepted a broad range of assets as eligible collateral. moreover, the bank has a " pooled collateral " system, which allows counterparties to change their collateral in a flexible manner when necessary. needless to say, excessive use of such supportive measures may hamper the proper functioning of financial markets, which should operate autonomously, and therefore it is important to maintain a good balance between offering supportive measures and leaving things to the autonomous functioning of the market. what we have learned from japan's experience in 1997 and subsequent years, however, is that once strains occur in borrowing from the market, smooth borrowing and lending become difficult, and problems cannot be easily resolved. in order to maintain a financial environment in which monetary policy accommodation effects derived from the present low interest rates are fully realized, the bank will continue to carefully monitor market developments and to ensure the stability of the money market. it will also carefully assess the future outlook for economic activity and prices, closely considering the

financial regulation and economic policies for avoiding the next crisis ( urjit r. patel, governor, 32nd annual g30 international banking seminar, october 15, 2017, inter - american development bank, washington, d. c. ) 1. let me start by reminding ourselves of some numbers that are a key backdrop for today ’ s panel discussion. total global external liabilities have grown from 30 per cent to 190 per cent of global gdp between 1980 and 2015, far outpacing the growth in global trade ( from 19 per cent to 28 per cent of gdp over the same period ). the main vehicle of this new globalisation has been crossborder banking flows, which constituted a third of global capital flows in the decade prior to the financial crisis. in parallel, the global trade network has become increasingly interconnected through supply chains that transcend national borders, and by the advent of new players, especially from the developing world. china now accounts for about 11 per cent of global trade and emerging market and developing countries ( emdcs ) taken together contribute 37 per cent ( up by about 15 percentage points since 2000 ). 2. during the global financial crisis, the explicit pre - crisis assignment of policy instruments to objectives became blurred. the experience demonstrated that macroeconomic policymaking is expected to do a fine balancing act to achieve multiple and, at times, conflicting objectives of monetary stability, fiscal stability and financial stability. within these trade - offs, financial stability has assumed some seniority, entailing for national authorities the constant need to monitor, identify and minimise the build - up of systemic risks in financial systems and reduce spill overs in the most efficient and effective way. this involves a fine dovetailing of the objectives of market efficiency into consumer protection and the management – even pre - emption – of systemic risks. 3. in my remarks today, i would focus on the following issues in the role of financial regulation in averting the next crisis : • • • • globalisation and adherence to global rules / standards − synergies and challenges. financial regulation and suddenness of crisis incidence − regulatory intervention needs to be more anticipatory and data - based. backward - looking versus forward - looking risk - based supervision − need for global systemically important banks to disclose their internal rating models. too - big - to - fail and moral hazard. • adequacy of global financial safety nets ( gfsns ) in the context of the size and speed of crises − gaps and