manuel sanchez : is mexico different from other emerging economies? remarks by mr manuel sanchez, deputy governor of the bank of mexico, at the university of york, york, united kingdom, 19 april 2016. * * * it is an honor to be with you today in this historic english city to speak at the prestigious university of york. this academic center has received much recognition in its first halfcentury for its achievements in both research and education, with a distinguished faculty and cosmopolitan student community. i would like to talk about how mexico has fared in the present international environment of heightened risk aversion, and some of the challenges that lie ahead. in particular, i would like to examine whether or not mexico ’ s structural and policy framework has set the country sufficiently apart from other emerging economies. differentiation is a highly desirable outcome as it would contribute to better economic conditions. i will argue that mexico should make further progress in this regard in order to consolidate price stability and enhance potential output growth. as usual, my remarks are entirely my own and do not necessarily reflect the position of the bank of mexico or its governing board. the rise and fall of emerging economies starting in 2010, emerging economies enjoyed a favorable financial environment characterized by substantial capital inflows in the search for yield amid extraordinarily lax monetary policies in advanced countries. at the same time, commodity prices rose and remained high, supporting growth in commodity exporters. also, asset prices in emerging markets tended to increase, including some bouts of currency appreciation vis - a - vis the u. s. dollar. while the taper tantrum in 2013 sparked a transitory rise in risk aversion, the market mood really changed around mid - 2014 as previous trends reversed, including a contraction of portfolio investment inflows in the second half of the following year, something which had not been seen since the global financial crisis. in a few words, emerging economies went from beauty to beast in the eyes of international fund managers. 1 among factors spurring this turn of events was the apparent perception that the process of u. s. monetary policy normalization was about to begin, given the end of longstanding assetpurchase programs in october 2014, and worries about the health of the chinese economy and policy measures there. the result has been an almost continuous decline for commodity and financial asset prices in emerging economies over the last two years, only partly attenuated in recent weeks. energy prices have been the most affected, but those of metals and agricultural

that relevant information is actually disclosed and that banks retain adequate capital and liquidity buffers, commensurate to their risk profile, throughout the economic cycle. that said, the lessons drawn from the financial turmoil also point to certain aspects of the framework that need to be revisited, such as the treatment of exposures to structured finance products and to offbalance - sheet vehicles. the financial industry retains a primary responsibility and has strong incentives to promote the smooth functioning of the financial system. it thus has to demonstrate its capacity to implement actions regarding transparency, valuation and risk management practices so as to finally turn the page on this difficult episode. supervisors and central banks around the globe will be monitoring very closely the adequacy of the actions taken by the financial industry to restore market confidence. in this context, an appropriate balance needs to be struck between market discipline and sound regulation that does not stifle financial innovation. finally, the experience of the turmoil also showed that eu arrangements for financial stability should be enhanced. an important element of this process is the strengthening of the cooperation and exchange of information between central banks and prudential supervisors in both crisis prevention and crisis management. in situations of financial stress, enhanced cooperation is important to allow both central banks and supervisory authorities to perform their respective functions more effectively. payment and securities settlement systems before closing, i would like to say a few words on developments in the field of payment and settlement systems, where the year 2007 was marked by major achievements. as you are aware, the eurosystem is engaged in four big projects to ensure well - functioning payment and securities settlement systems in the euro area : target2, target2 - securities, the update of the correspondent central banking model ( ccbm2 ), and sepa. in tandem with these efforts to promote the integration of payment and settlement systems, the escb and the committee of european securities regulators are currently developing recommendations to ensure the soundness and safety of the european post - trading sector. * * * ladies and gentlemen, the ecb places the greatest value on the fulfilment of its accountability obligations. in last year ’ s resolution you made a number of suggestions to the ecb and requested us to report back on the follow - up given to them. we carefully considered these suggestions and i am pleased to inform you that in his letters of transmission of this year ’ s annual report to president pottering and to you, madame beres, as chair of this committee, president trichet has provided