, neither economists nor economic agencies had a full understanding of housing market speculation and they were unable to arrive at a correct prediction of the outcomes resulting from banks ’ behavior and their competitive structure. although central banks are not free of such criticism, the greatest change since the recent crisis is that their role and position have been heightened as they have been actively involved as lenders of last resort in overcoming the crisis. on the other hand, however, the possibility has also increased that central banks will face a paradox of credibility due to the conflict between their policy goals of achieving both financial system stability and price stability. in this regard, central banks, as the guardians of the financial system, are called upon by society to undertake the task of analyzing and examining macro - prudential policies and regulations. in line with this trend, the bank of korea was given responsibility for financial stability under revised legislation this august, so that it is now better placed to exercise its financial stability function more actively. hopefully, this seminar will provide an opportunity for central banks from around the world in the light of their particular economic situation to come up with wide - ranging ideas on how to cope most effectively with capital flow volatility. bis central bankers ’ speeches

this area as well, i a missing a study providing answers that take all benefits and costs of different options into account. all these observations raise the issue as to whether the mechanisms for coordination at the level of the eu should be used to achieve more convergence in the various aspects of deposit insurance schemes in the context of the presently decentralised approach to financial regulation and stability. this convergence could go in the following directions. first, in addition to setting a lower bound, also the maximum amount covered could be limited and the specification which deposits are included and which not better harmonised. partial insurance, or the so - called co - insurance, for smaller deposits could be removed where it still exists, as recent experience seems to suggest that it may reintroduce incentives for retail depositors to run a bank. second, it may be advisable to move towards pre - funded schemes, which are financed through risk - sensitive premia. this would bring bank incentives better in line. obviously, it would also mean significant transitional costs for the countries that for a comprehensive comparison of eu deposit insurance schemes, see european commission ( 2007 ), scenario analysis : estimating the effects of changing the funding mechanisms of eu deposit guarantee schemes, joint research centre, february. presently operate schemes funded ex post. pre - funded schemes would also permit to mobilise very rapidly the guarantee which might be a decisive advantage to avoid bank runs. such european convergence of deposit insurance practices would, however, not solve the problem that at least as important differences exist between european and non - european countries. deposit insurance is naturally not only relevant for financial integration but also, very much, for the handling of financial crises. clearly the cross - country differences i mentioned above ( and several others more ) are at least as much an issue for crisis prevention, management and resolution as they are for financial integration. convergence in deposit insurance arrangements across european countries should not advance in a way that neglects either the financial stability or the financial integration aspect of it. both need to be well aligned. overall, we agree with the commission ’ s “ bifurcated ” approach, according to which further progress at a shorter time horizon should first be achieved using the available non - legislative mechanisms and more fundamental reforms requiring legislation should be based on a deeper analysis, particularly considering the results of the debates on the financial stability set - up and burden sharing that are presently under way in europe. 8 let me conclude with some remarks on the ongoing process of significant market correction that