interest rates and supporting economic recovery, though cyclical and structural headwinds have made achieving our inflation targets a challenge. a legacy of the crisis is that policymakers now have a broader range of tested tools to turn to the next time the effective lower bound is reached. we must continue to assess additional strategies and tools to bolster our economies and meet our inflation and employment mandates. finally, the crisis and great recession brought into stark relief the need for transparency and accountability for central banks. central bank communication is increasingly important and increasingly challenging. it is important because clear, transparent communication about the economy, the risks, and our policy responses is critical for the effectiveness of our tools and for our accountability to the public in a democratic society. it is challenging, because we are operating in a changing macroeconomic environment with tools that, while no longer new, remain less familiar to the public. moreover, our audience has become more varied, more attuned to our actions, and less trusting of public institutions. gone are the days when the federal reserve chair could joke, as my predecessor alan greenspan did, “ if i turn out to be particularly clear, you ’ ve probably misunderstood what i said. ” 1 central banks must speak to main street, as well as wall street, in ways we have not in the past, and main street is listening and engaged. where does this leave us, and how should policymakers adapt to this new environment? recognizing challenges posed by the changing structure of the economy, the need for effective policy responses, and the importance of clear communication, central banks are taking a closer look at their strategies and the range of tools currently at their disposal. for example, the bank of canada examines its framework every five years as part of the renewal of its inflation - control 3 / 4 bis central bankers'speeches agreement with the federal government. canadian officials have announced the bank will “ assess a broad range of monetary policy frameworks ahead of the renewal in 2021 ” of this agreement. 2 the bank of england commissioned a review over the past year of the future of the united kingdom ’ s financial system and what it might mean for the bank ’ s agenda, toolkit, and capabilities. 3 for our part, the federal reserve is conducting, for the first time, a public review of the strategy, tools, and communications that we use to promote our goals of maximum employment and price stability. 4 the heart of this review has been a series of fed listens events around the country,

secondary market and so has pricing of icelandic banks ’ cdss. the banks have also tapped international credit markets on favourable terms recently and have more than met their capital requirement so far this year. their market position has therefore definitely improved again, which must be welcomed. the banks have vigorously expanded in other countries in recent years. most indications are that their foreign investments have been successful, in the central bank of iceland ’ s view. their subsidiaries are sound financial companies subject to stringent supervision in their home countries, just like the parent companies in iceland. likewise, these companies operate in stable economies where the outlook is bright. at the end of 2005, two - thirds of the banks ’ consolidated lending was to foreign borrowers. in effect, therefore, overseas expansion has strengthened the banks ’ foundations. they are no longer so much at the mercy of economic fluctuations in iceland or any other country. on the contrary, their risks are dispersed. pension funds i shall now turn to the matters in which you are most directly involved, the position of pension funds in iceland. their position is remarkable in all respects, especially by international comparison. most or all other industrial countries have rapidly ageing populations and face growing and serious fiscal concerns about future pension fund arrangements. since their pension schemes are largely funded by taxation, a sharp rise in contributions is foreseeable over the next few decades. the reasons are large year - classes approaching retirement age, increased longevity and a lower birth rate. conditions are quite different in iceland, where age distribution is changing more slowly than in most countries with similar economies. iceland ’ s retirement pension system is based on all working persons saving a proportion of their wages in a fund which is then used to pay their pension. taxes therefore does not need to be raised even if there is a proportional rise in the number of pensioners. in addition to pension funds, some pensions are paid through the national insurance benefit system and there are also voluntary supplementary pension savings schemes. iceland ’ s pension system thereby fulfils what has been considered international best practice in this field [ the three - pillar system ]. total assets of icelandic pension funds were equivalent to 120 % of gdp at the end of 2005. no other pension system in the world is on such a strong footing. at the end of 2004, when total assets of icelandic pension funds corresponded to more than 100 % of gdp, the figure for the netherlands was just over 100 % and for the us 80 - 90 %. in the overwhelming number of industrial countries