. i think it would be fair to say that there has been, as i said, a revolution led by innovation in the risk management field. not only have we identified, quantified and developed various models in risk management but we have also nurtured the aspect of risk management in a number of institutions all over the world. so i don ’ t see it as being an impossible task for economies. there are complications in its implementation where there are inherent weaknesses of different types. we all know that the world has suffered repeatedly from the accumulated huge portfolio of non - performing loans. and the non - performing loans would be a reality even if we were to absolutely eliminate the vested interests from the banking system which encourages willful default, a factor quite familiar to us. defaults are inevitable because of the conventional corporate risks as well as the business cycles that industries face. what is important in going forward is to be able to define and capture these risks effectively, and to appropriately weigh these risks and make effective provisions. it is really in this context that basel ii defines and lays the ground rules for risk management. banks all over the world have been more cautious in their credit appraisal and monitoring system and in assessing the gaps in their risk management systems. i think the most important factor in positioning ourselves effectively is education, which alone will help us to understand what the risk management architecture is all about. let me now talk briefly about the second item. the success of basel ii depends exclusively on the accuracy and reliability of good quality data. we need adoption of the international financial accounting and reporting systems. we need to assess the risks accurately. and there has to be intellectual honesty in reporting all this. besides the internal assessment of the reliability of information from a regulator ’ s point of view, the requisite comfort will be achieved only if an independent agency is able to do a due diligence of the company and its inherent risks. within pakistan there are only two credit rating agencies and i am not sure that with the universe that they capture, whether we are well positioned to go forward in even adopting the standardized approach effectively. in addition to the credit rating institutions, we need to exploit more effectively the role of the auditors of the borrowing entity. it has to be acknowledged that the data stream currently available is not fully comprehensive to serve our requirements. so it is not just about developing information flows ; it ’ s about changing the quality and the timely reporting of this data. another important aspect of reliability is

svein gjedrem : monetary policy from a historical perspective speech by mr svein gjedrem, governor of norges bank ( central bank of norway ), at the conference to mark the 100th anniversary of the association of norwegian economists, oslo, 16 september 2008. the text may differ slightly from the actual presentation. * * * introduction let me begin by offering my congratulations to the association of norwegian economists on its 100th anniversary. one hundred is a respectable age. in norway, the introduction of a university degree in economics was certainly an important stimulus in the first part of the last century. in the period since the second world war, major changes in society have increased the demand for expertise in the field of economics. and economists are constantly gaining new insights. this also applies to the field of central banking, even though one of the fundamental central bank responsibilities – to safeguard the value of money – was as important 100 years ago as it is today. monetary policy in norway has changed considerably over the past 100 years. the government, with the support of the storting, has now defined an objective for monetary policy of low and stable inflation. norges bank sets its interest rate with a view to achieving price stability. this has not always been the case. monetary policy in norway norges bank was established in 1816 and was placed directly under the storting ( norwegian parliament ). the government had no control or influence. the bank was authorised to issue banknotes that were to serve as legal tender. to ensure stability in the value of money, the banknotes were to be redeemable in silver, although this was not achieved until 1842. later – in 1874 – the basis for the monetary system was changed from silver to gold. one year later, in 1875, norway entered the scandinavian currency union with sweden and denmark. norway was a member of the currency union until around the mid - 1920s, but after 1914 the union lost its practical significance. 1 the latter half of the 1800s was generally marked by stable prices. hence, when the first students completed their degree in economics in 1908, price stability was perhaps not the main concern of economists. when the first world war broke out in 1914, confidence in the monetary system faltered. the obligation to convert banknotes into gold was suspended. the money supply was out of control and inflation rose sharply. it reached 40 per cent in 1918. when nicolai rygg took office as chairman of the board of norges bank in 1920, he regarded