. in some countries it is the central bank, in other countries there is a separate financial supervisory authority, sometimes the responsibility is shared between different institutions. in sweden, the financial supervisory authority is responsible for supervision and regulation, the riksbank is responsible for lending of last resort to solvent banks and for promoting a safe and efficient payment system, while the national debt office is responsible for the resolution of failed banks. during times of crisis, these authorities cooperate closely with the ministry of finance. my point here is that financial - stability policy and monetary policy are quite different, with different objectives, instruments and responsible authorities, the latter with considerable differences across countries. this does not mean that there is no inter - action between them. financial stability directly affects the financial markets, and financial conditions affect the transmission mechanism of monetary policy. problems in financial markets may have a drastic effect on the real economy, as the current financial crisis has shown. monetary policy affects asset prices and balance sheets and can thereby affect financial stability. but the fact that financial - stability policy and monetary policy are conceptually distinct, with distinct objectives and distinct suitable instruments, has to be taken into account when considering the lessons of the financial crisis for monetary policy. in particular, it makes little sense to extend the mandate of monetary policy to include financial stability. 15 what are the specific conclusions for flexible inflation targeting? one important lesson from the financial crisis is that financial factors may have a very strong and deteriorating effect on the transmission mechanism, making standard interest - rate policy much less effective. this motivates more research on how to incorporate financial factors into the standard models of the transmission mechanism used by central banks. a rapidly - increasing volume of such research is now being produced by academic and central - bank researchers and presented at an increasing number of conferences on financial factors and monetary policy. important and challenging questions include how potential output and neutral real interest rates are affected by financial factors and financial distortions ( curdia and woodford 2009, walsh 2009 ), and however, conceptually distinguishing the two policy areas does not rule out that there might be advantages of to keeping a large part of the responsibility for financial - stability policy within the central bank, as argued by, for instance, blinder ( 2010 ) and nyberg ( 2010 ). what impact financial factors have on the general equilibrium effects of alternative policy - rate paths on inflation and resource utilization forecasts. 16 even with much better analytical foundations concerning the role of financial factors in the transmission mechanism, there

, a media campaign in all parts of the world against terrorism is also very important. that is something that the world has clearly recognized today, and internationally, we see a greater coordination in the media in dealing with terrorism. the other important front in this war against terror is the stopping of financing for terrorism. without finance, terrorism cannot progress. so, steps taken by countries to ensure that the funding lines to terrorism and money laundering are cut off, that terror financing transactions are interrupted or stopped, and that there is worldwide co - operation to track down persons who are suspected of being involved in terror financing in whatever way, is of vital importance. just take a small example. if at the end of the month, you do not receive your salary, you will find it difficult to comfortably progress with your next month ’ s activities. in the same way, if we can stop the funds going to terrorist activities, that will put a dampener on their activities. it is very simple to understand. therefore, not only should we deal with terrorists on a military basis, but we should disrupt their progress by cutting off and interrupting their funding lines. by doing so, we complicate their agenda. in order to do so, and to continue to do so, we have to equip ourselves. the judiciary, the law enforcement agencies, the regulators, the media, the bankers, the prosecutors, all of these groups, have to equip themselves with whatever it takes, to meet with this challenge. we have to learn from each other. we have already learnt many lessons during our own activities in this field. but, it is important that we share such knowledge and experience with others as well. if we do so, perhaps others too, could replicate some of those efforts which have been proved to be successful. hence, there is an urgent need for us to create the awareness. we also have to enact the necessary laws. sri lanka has already passed the necessary laws for this purpose : so have many other countries. that is very important. because, without the legal framework and the legal backing, our efforts will not succeed. then, we have to build our own capacities. we have to have people who are trained and competent to deal with these challenges. because, unless you have the competence, and the ability to recognize certain disguised transactions, the ability to see through the clever facades, and the ability to anticipate the next move of the terror financiers or money launder