, its lowest possible level. once we reached that effective lower bound, we developed and published a framework for unconventional monetary policy. our conditional commitment is the only element of that framework that we have activated. while the bank ’ s unconventional policy framework demonstrated to canadians that we were not out of bullets, the use of the conditional commitment reassured them that we were not trigger happy but, rather, disciplined by the pursuit of our inflation target. action alone is not sufficient. it must take place within the proper context. once again, i stress that the bank places supreme importance on policy measures within a well - developed framework. the bank ’ s monetary policy response to the current crisis has been consistent with ben bernanke ’ s mea culpa to milton friedman and anna schwartz, regarding the lack of action by the federal reserve during the depression : “ you ’ re right, we did it. we ’ re very sorry. but thanks to you, we won ’ t do it again. ” bernanke ’ s admission underscores the importance of research and learning – something the bank has long understood. in - depth, comprehensive, and impartial research has always been critical to our success. one of the first steps taken by our first governor, graham towers, was to create a research and statistical department. 6 through aggressive recruitment of promising young academics and co - operation with university - based researchers and international colleagues, innovations have included leading macro models ( such as rdx and totem ), work on price - level targeting, and cutting - edge research on payments systems. 7 the bank has also learned from the conduct of policy, including from our mistakes. gerald bouey famously recognized that “ we did not abandon m1, m1 abandoned us, ” before initiating a search for a new monetary anchor. more recently, the bank has been determined not to repeat the errors of the 1970s, when we overestimated the rate of potential growth in the wake of a major global shock. 8 most significantly, the bank is now guided by the discipline of an inflation target. canada helped pioneer inflation targeting, having adopted it in 1991 under the governorship of john crow. 9 during the great recession, its value was clear. by disciplining our objectives and promoting transparency and accountability, the target has anchored inflation expectations, thereby ensuring that reductions in our overnight rate drive down real interest rates and stimulate the economy. financial system stability and the provision of liquidity consider now a second challenge that has echoed across

well behind financial innovation. the global response the global financial reforms launched by g - 20 leaders are designed to address the three weaknesses i have just discussed. first, to reduce the incidence and severity of financial crises, financial institutions will be required to have more ample cushions of capital and liquidity. second, steps will be taken to reduce the risk that financial markets become channels of contagion. and third, mechanisms to deal with the too - big - to - fail problem will be made more robust. i will briefly discuss each of these elements. the centrepiece of the agenda for global financial reform is the new basel iii rules on capital and liquidity. these rules substantially increase the loss - bearing capital that financial institutions must hold, combined with required liquidity ratios and a limit on leverage. in addition, a countercyclical buffer will be established so that capital is built up in good times, which can subsequently be available to absorb losses. 1 on financial markets, a key step is to strengthen market infrastructure to reduce systemic risk. the g - 20 leaders agreed to require clearing and settlement of over - the - counter derivatives through central counterparties, and to increase transparency in those markets – which proved to be a channel of financial contagion during the crisis. a central counterparty is also being established in canada for clearing repurchase agreements ( repos ), a key form of short - term financing. a related issue is market - based financing, including securitized lending. work has begun under the auspices of the financial stability board to define the sector, to develop the data and methodology to systematically monitor it, and to develop policy options. 2 to address the too - big - to - fail problem of systemically important financial institutions, work is under way to ensure that they are appropriately supervised and adequately capitalized to absorb losses, and to establish a framework for resolution in the event that they do fail. so this, in a nutshell, is what is being done to address the weaknesses underlying the 2008 crisis, with a view to creating a more resilient global financial system. i will now go on to discuss a new pattern of risks that has emerged since the recession. risks in a two - speed global recovery as i have already mentioned, the current global recovery is operating at two speeds, with robust growth in emerging - market economies and anaemic growth in the advanced the bank of canada ’ s research report on the costs and benefits of the new rules can be found at