independent of their individual characteristics, mixing the wheat with the chaff. but securitisation in itself is a useful financial tool. it allows the diversifying of sources of funding for many borrowers who, otherwise, would have no access to capital markets. it allows the opening up of new channels of finance for the real economy. and it can allow cushioning the impact on the supply of credit that would otherwise result from bank deleveraging. in this context, the ecb and the bank of england took a joint initiative to promote and garner recognition for high - quality, transparent forms of securitisation. this was useful in several ways : first, it sent a clear message to the private sector that key public - sector participants in abs markets were not abandoning these assets, which had been lagging in terms of issuance volumes and liquidity. second, it signalled to other policymakers that all abss should not be tarred with the same brush. third, it created a basis for additional coordination between our two institutions which, in an era of increasingly cross - border regulation, is crucial to avoid loopholes and inconsistencies. this experience with securitisation, then, was an example of what appropriate governance means : having regulations that are sufficiently sound to preserve the integrity of the market, but not so taxing as to suffocate it. that is why i said that free markets stipulate not just the right to take part, but also the means to protect that freedom. to be true sources of opportunity, and to protect the interests of those who use them, they need policing. and that makes the market, inevitably, a political construct. consider the case of markets that are truly open – by which i mean, as open as the single market of the european union, where internal frontiers have been abolished entirely, where passporting of services across the entire eu is a right, not a privilege. in this situation, national governments, or national courts of law, cannot alone provide full protection to their citizens against abuse of property rights or any form of unfair competition that may arise from abroad. nor can they alone protect the rights of their citizens to carry out business abroad unimpeded by protectionist restrictions. for the market to be truly free, there needs to exist a judiciary power that can enforce the rule of law on all, everywhere. it has to have jurisdiction across the entire market. a judiciary power implements the law, so there must

but also to avoid the unwarranted impact on export industries, particularly of goods which tend to be more sensitive to the exchange rate. one could look at it as the qe of small open economies. a year passed, and still the inflation rate was below target and still in negative territory and we observed that the same forces were at play, and expected to continue to be due to the global economic and monetary environment and because of our own domestic conditions. it was clear that we needed to show our patience with the price environment. we did so by introducing nonconditional forward guidance – there were clearly too many elements behind the low inflation to allow us to turn some into conditions – which we reiterated more recently, and in our view was correctly interpreted by the market. patience has its virtue but must not be confused with inaction, the boi has been patient with inflation to return, but quite active to ensure that the crucial broader environment of price stability remains intact. inflation expectations of the medium and longer term are still well anchored within the target range bestowing credibility to the monetary policy. to conclude in the spirit of this forward looking conference, i would draw 3 points from the recent israeli experience. first, protracted periods of below target inflation do not entail an automatic loss of monetary policy credibility. for the latter to be maintained, we need to better understand, and better explain, how the transmission mechanisms operate – through short term interest rates, long term rates, exchange rate and asset prices. this will lead us to use more tools and more targeted tools when available. second, the israeli experience does not lead to the need of changing the inflation target : an important anchor for the economy must not be amenable to easy change unless there is strong evidence that it is no longer at the appropriate level. inflation in israel is also strongly impacted by global inflation, and while the debate on changing the inflation target is also taking place globally, there is no reason for israel to be a pioneer in this change, if the change takes place. third, monetary policy must take into account financial conditions as signaled daily, if not hourly by the markets, but as upholder of a necessary and crucial nominal anchor it must be able to withstand noise and remain forward looking. this in turn requires the central bank to engage in discussions and better explain its interpretation of sometimes contradictory data on the one hand, and to withstand “ flavor of the day ” pressures. “ 2 / 2 bis central bankers'speeches