##its sponsored by canada's major banks. these banks have agreed to provide global - style liquidity support to their conduits. but they have not been immune to both global and local problems. as a result, the banks'conduits have been rolling over at shorter terms and higher interest rates and, in some instances, the banks have been taking some maturing paper onto their balance sheets. nevertheless, the major banks appear to be well placed to deal with the current dislocations. in a joint statement last month, these institutions said that their commitment to support the abcp market is underpinned by the strength of their financial positions, their confidence in the underlying assets, and their ongoing commitment to provide liquidity for their conduits upon maturity. further, data published by canada's superintendent of financial institutions show that our domestic banking sector is well capitalized. at the bank of canada, we welcomed this effort to help re - establish well - functioning money markets in canada. and we are confident that our banks have the capacity to continue to support their conduits as necessary. institutional transparency i said earlier that one of the lessons of the events of august is the absolute importance of transparency if debt markets are to function properly. but the importance of transparency is not limited to money markets and debt instruments. in my view, there is a clear case for transparency more generally in the operation of all financial markets. in most countries there are fairly clear rules requiring transparency in the operation of mutual funds, so investors can tell what they are purchasing. hedge funds, by their nature, are less transparent. but there is also, i believe, a clear case for increased transparency, at least with respect to their objectives, operating procedures, and governance. the objective of accounting standards is also to increase transparency. but it is very difficult for firms to put a precise value on complex instruments for reporting purposes. for many of these instruments, there is no well - established market against which they can be marked. and the models against which these instruments are valued are simply that – statistical models that can only generate estimates of value within what is often a wide range. this means that it is very important for firms to be transparent about the methods used to estimate values and about the range of possible values around these estimates. let me now say just a few words about the importance of transparency in governmentsponsored institutions, whether domestic or international. i will begin with a few words about sovereign wealth funds,

policies to try to cushion the economy from the impact of those events. as a result, our adjustment was slower and more painful than it needed to be. we ended up with a weak economy, high inflation, and large government budget deficits. the lesson that canadians learned from this period is that macroeconomic and microeconomic policies must be clearly focused on facilitating adjustment to economic change. by the beginning of the 1990s, it was clear to us that we needed a framework of policies to help with that adjustment, to bring down inflation, and to put our public finances in order. the first major change came in 1991, when the bank and the government of canada agreed on a series of explicit inflation - reduction targets. the agreement called for an inflation target that would gradually reduce the rate of inflation to 2 per cent, the midpoint of a 1 to 3 per cent range. the agreement has been extended three times, with the latest one covering the period to the end of 2006. each time, the midpoint of the target range has been kept at 2 per cent. this framework has served us very well. since the end of 1994, inflation has averaged almost exactly 2 per cent. moreover, not only has inflation fallen, it has become more stable than it was in the 1970s and early 1980s. just as importantly, we found that inflation expectations quickly fell into line with the 2 per cent target. and expectations have remained close to 2 per cent in recent years. one of the most important consequences of adopting a system of inflation - control targets is that we at the bank of canada can now explain more clearly to business, to labour, and to the general public what we are doing and why. one should not underestimate the benefits that arise from having the public understand the policies and actions of its monetary authority. this understanding makes the conduct of monetary policy easier, and gives citizens a measure by which to judge the performance of their central bank. while no single mechanism is perfect in this regard, our experience suggests that the outcomes of monetary policy are better with a clear, well - understood framework. the second major adjustment that we had to make in canada was to get our fiscal situation under control. in the early 1990s, the combined federal and provincial deficits were running at about 8 per cent of gdp. this was clearly unsustainable. and so between 1993 and 1997, governments in canada made a determined, and successful, effort to eliminate their deficits. this fiscal adjustment helped improve the credibility of