that current account adjustments take longer in a monetary union than in fixed exchange rate regimes. one could say that the common monetary policy acts as an anti - lock braking system ( abs ). it prevents the funding of external deficits from coming to a screeching halt. but a balance of payments crisis is a bumpy ride on a rough surface, and under these conditions an abs prolongs rather than shortens the braking distance. that is why rally cars do not have abs. in other words, economic adjustment risks stalling. but policy room for manoeuvre might be limited in a crisis and the long - term functioning of the monetary union risks being further undermined by the crisis and by attempts to cope with it – as we saw recently. some crisis measures tilted further the balance between control and liability and monetary policy came under pressure to ease the impact of the crisis on banks and states. with regard to short - term crisis management, however, it is essential to keep monetary policy and fiscal policy segregated. in a crisis, central banks play an important role as lenders of last resort to solvent banks. this involves short - term refinancing operations in return for high - quality collateral. every support measure for a financial institution that goes clearly beyond this means that the central bank is performing a quasi - fiscal role. measures like financial aid to insolvent banks or the take - over of banks ’ balance sheet risks rightly belong in the domain of parliaments and elected governments. only parliaments and elected governments have the democratic legitimacy needed to redistribute risks between euro - area countries. if central banks were to perform a quasi - fiscal role, they risk becoming dominated by fiscal policy, which could undermine their ability to maintain price stability. to avoid such a situation, it is important to prevent the build - up of imbalances. hence, additional safety systems in the form of pre - emptive rules are essential. in the first place, excessive public deficits have to be avoided by strict deficit rules. such rules were introduced by the stability and growth pact even before the euro was introduced. unfortunately, these rules were not enforced strictly enough ; they were violated more than once, not least by germany and france. in response to the crisis, the rules were stiffened. but the procedure became overly complex and affords considerable political leeway. and so far, the commission ’ s interpretation has been rather lenient, undermining the binding effect of the new rules

the new and increased opportunities for financial crime, particularly in a crossborder sense. 13. in particular, the externally orientated economy of hong kong means that geopolitical events, and the increasing complex global sanctions as a response to those events, continue to challenge the sanctions screening and compliance programmes of banks. the hkma has identified sanctions compliance – in particular the risks emanating from dprk – as a core supervisory priority in the year ahead, and i am glad that there is an opportunity for my colleague to share some of our work in this area in one of the panel discussions later today. 14. now to be clear : the developments i mentioned have actually driven changes for good. and i can say without hesitation that financial institutions are undoubtedly more capable of 2 / 4 bis central bankers'speeches combatting ml / tf risks than they were 10 or 15 years ago. let me illustrate. over the past few years all of our banks have put in place an assessment of ml / tf risk across the institution which informs the design of aml / cft controls – this helps to ensure resources are targeted towards areas of higher risk. the banking sector also continues to pull its weight in reporting suspicious transactions - last year we saw a 25 % increase from 2016 in terms of strs. this is a reflection of the increased ability of upgraded monitoring systems to detect suspicious transactions on the one hand, and the willingness of banks to report suspicion where they see it as well as to take robust actions to mitigate the risk on the other hand. but these same developments have also resulted in “ casualties ” – a clear example of which is the “ de - risking ” phenomenon – and this has led to financial inclusion being one of the priorities for the current fatf presidency. this is also something that we in hong kong are very committed to addressing. 15. the reality is that we often see institutions implementing more capable aml systems, and in that process collecting a lot more information on customers or including more scenarios in transaction monitoring. this is all good, but this may not always translate into greater effectiveness, and too often there is not a sufficient focus on answering the questions of : “ does it deliver the right results or outcomes? ” and “ is the system more effective in detecting and preventing criminals from abusing the institution? ” 16. so i would highlight in particular three issues as having the potential to significantly change how effective we are in this work and which are being discussed at this event.