##sa requires banks to test their repo capacity by lending out gilts from their liquid asset buffers. ultimately we expect a counterparty would draw on the dwf if it had to, despite any stigma concerns. the risk is that the perception of stigma might delay an application to borrow, making a firm ’ s liquidity position more perilous. the solution to this problem requires the bank to work closely with both the supervisors and the commercial banks themselves, to ensure appropriate timing of any use. c ) extended collateral term repo facility ( ectr ) the most recent policy development in our liquidity insurance tools has been the addition of the ectr facility in december 2011. although it is a contingent facility, the ectr is a permanent part of the bank ’ s sterling monetary framework. the design of the ectr shares elements of both the iltrs and the dwf. like the iltrs, it is a competitive auction, designed to provide reserves to the banking system as a whole. bis central bankers ’ speeches participants submit quantities they would like to borrow and a price ( expressed as a spread to bank rate, subject to a minimum of 125bps ) that they would be willing to pay. the disclosure policy ( total amount bid for / allocated ) is also very similar to the iltr, which together with the market - wide nature of the operation, should help alleviate any perceived stigma associated with the facility. the ectr ’ s collateral arrangements, however, are similar to the dwf – borrowings can be backed by the full range of eligible collateral, so long as it has been pre - positioned in the discount window beforehand. the purpose of the ectr is to make liquidity available against the least liquid collateral, to the market as a whole, and would be offered only if there was likely to be multiple take up. ( if only a single firm needed support they could be directed to the dwf. ) consistent with all the bank ’ s facilities, only firms judged to be solvent and viable would be eligible to participate. subject to that, all counterparties that have access to dwf would be eligible to participate in any ectr operations. although the facility has been announced, the bank has not yet offered any operations under the ectr. that reflects our judgment that market conditions have not yet been consistent with a likely demand for its use. the bank would revisit this decision in the event of any marked deterioration in market conditions

prolific, especially over the last decade. for the world taken together, the ratio of foreign assets and foreign liabilities to gdp rose from 133 per cent in 1994 to over 300 per cent in 2008. 2 calculations based on imf direction of trade statistics, june 2010. calculations based on imf balance of payments year book, 2010. bis central bankers ’ speeches 15. the impact of globalization of labour was by far more striking. emerging asia added nearly three billion to the world ’ s pool of labour as it integrated with the rest of the world over the last two decades thus hugely improving its comparative advantage. together, the three dimensions of globalization – trade, finance and labour – helped emerging asia multiply by a factor its exports to the advanced economies. the result was large and persistent current account surpluses in the asian economies and corresponding current account deficits in the importing advanced economies. these global imbalances combined with developments in the financial sector to brew the crisis to its explosive dimensions. 16. so, where do we go from here? the g - 20 is now actively engaged in the challenging task of redressing structural imbalances in the global economy. at their pittsburgh summit in september 2009, the g - 20 leaders agreed on a “ framework for strong, sustainable and balanced growth ” and committed to a “ mutual assessment process ” ( map ) which is a peer review of each country ’ s progress towards meeting the shared objectives underlying the framework. recognizing that global imbalances, which had narrowed during the crisis, started widening again in the exit phase, the g - 20 resolved that promoting external sustainability should be the focus of the next stage of the map and entrusted this task to a framework working group ( fwg ). 17. india is privileged in co - chairing, together with canada, the framework working group for managing the task of developing the indicative guidelines for assessing and addressing persistent global imbalances. the success of this initiative is critical for redressing the problem of global imbalances. 18. in moving forward on finding a sustainable solution to global imbalances, we will be guided, individually at the country level and collectively at the g - 20 level, by insights from academic research. it is in this context that work of insightful economists like prof. obstfeld will be important. ladies and gentlemen, please join me in welcoming prof. maurice obstfeld to deliver the 12th l. k. jha memorial lecture. bis central bankers ’ speeches