before. third challenge : brexit. it is bad news first and foremost for the united kingdom, but also for europe, and we hope that the draft agreement the negotiating teams have reached last tuesday can be finalised. however the european financial system will inevitably be restructured. instead of a single city for the continent, we expect an integrated polycentric network of financial centres, with specialisations based on areas of expertise. this is an opportunity to improve the circulation of the abundant savings in the euro area – a surplus of over eur 400bn – towards equity financing and innovation. paris is well qualified to become the market hub of this new euro area network. it hosts one of the most developed capital markets in continental europe, four global banks, the first insurance and asset management industry, a leading bond market, the largest commercial paper market with neu - cp and the largest private equity investor in continental europe. in addition, french financial authorities, including the banque de france, are working together to facilitate the dissemination of sound and safe financial innovations and fostering the scaling up of sustainable finance. green finance in particular is one of our priorities, and this is the reason why, at the one planet summit last december, the banque de france launched the network for greening the financial system ( ngfs ), together with central banks and supervisors from all over the world. moreover, a number of international banks have decided to transfer the bulk of their market activities to paris, and japanese financial institutions will always be welcome in paris. 2. beyond europe, our collective questions let me turn to the global questions that we have to address together, starting with japan and france. i guess our views are very close here. there are increasing tensions in the global environment, starting with protectionism. beyond the direct trade policy shock resulting from a rise in import tariffs, two factors at least may amplify the decline in global gdp : a decline in investment demand caused by firms ’ falling business confidence due to uncertainty, and a rise in the financing cost of capital due to an increase in actual or perceived borrower risk. according to banque de france model estimates, the negative impact on gdp of higher import tariffs is 2 to 3 times larger when we account for these indirect channels. and this increase in uncertainty can produce front - loaded negative effects, even before the effective implementation of protectionist measures. that said, protectionism is first and foremost a negative supply - shock with stagflationary effects

reference rates were intended to capture on a daily basis borrowing costs along each currency - maturity combination based on the experience of the submitting banks. the actual process for fixing libor each day is quite straightforward. each morning the submitters from each contributing bank answer the following hypothetical question : “ at what rate could you borrow funds, were you to do so by asking for and then accepting interbank offers at a reasonable market size just prior to 11 a. m.? ” the transmitted submissions are ordered by rate for each currency and maturity pair. the ordered rates for u. s. dollar libor, for example, are then trimmed by generally dropping the top and bottom 25 percent of submissions to remove any influence of outliers. the average of the remaining individual submissions is calculated and then posted. prior to the recent reforms, all submissions were immediately made public. the aim of the libor - setting process has been to create a set of reference rates that would be credible and would generate robust measures of bank funding costs across a wide range of market conditions. the credibility was based on the borrowing experience from the submitting banks represented through their submitters – those individuals responsible for actually submitting an answer each day to the administrator. the potential conflicts of interest between the submitters and traders within the bank were typically handled through internal policies such as the presence of information barriers that were intended to prevent sensitive information from flowing between the traders and libor submitters. the robustness to market conditions would be maintained even in periods of market stress or a lack of transactions by the reliance on the hypothetical question instead of the use of actual transaction data. that is, even if during stressed times when trading became sporadic in a particular currency - maturity pair, all submitters could still answer the question even if their bank did not happen to engage in any trades on that particular day in that particular pairing. this ensured a large sample size even during stressed market conditions. the trimming of the sample helped to minimize the influence of any outlier submission, but also limited the ability for any one submitting bank to influence the posted rate. see mcconnell, “ systemic operational risk : the libor manipulation scandal. ” journal of operational risk, 8 ( 3 ) : 59 – 99. bis central bankers ’ speeches as is clear from the hypothetical question, libor is meant to capture a bank ’ s cost of unsecured borrowing. this means that the reference rate will reflect not only a risk - free component, but also counterparty