##shing. as i will discuss in a moment, in this context, the bank anticipates a slowing in both the rate of household credit growth and the upward trajectory of household debt - to - income ratios. the recovery in net exports is expected to be modest given the relative weakness in the u. s. economy, canada ’ s underrepresentation in fast - growing emerging markets, bis central bankers ’ speeches while underlying inflation is relatively subdued, the bank expects that high energy prices and changes in provincial indirect taxes will keep total cpi inflation above 3 per cent in the short term. total cpi inflation is expected to converge with core inflation at 2 per cent by the middle of 2012, as excess supply in the economy is gradually absorbed, labour compensation growth stays modest, productivity recovers and inflation expectations remain well - anchored. the bank expects a re - acceleration of growth in the second half of the year, consistent with a renewed narrowing of the output gap. we will update the projection in the july mpr. allow me to turn now to the bank ’ s monitoring of developments in the financial system. although the canadian financial system is currently on a sound footing, the bank judges that, largely because of external factors, risks to its stability remain elevated and have edged higher since december. of the five risks identified in the fsr, i would like to concentrate on three : – first, sovereign balance sheets remain strained in many advanced economies. fiscal strains in the euro - area periphery have continued to build despite continued efforts by the affected countries and assistance from the international monetary fund and the european commission. whether or not a sovereign credit event occurs, these strains could trigger a sharp repricing of credit risk for other governments with high debt burdens, as well as a more generalized retrenchment from risk - taking in global markets, including markets in canada. – second, a long period of low interest rates globally may fuel excessive risktaking. the search for yield could cause risk to be underpriced or lead investors to take on exposures that they may not be able to manage if conditions become less benign. our institutions should not be lulled into a false sense of security by current low rates. – lastly, the high level of household indebtedness has increased financial vulnerabilities in canada. canadians are now as indebted ( relative to their income ) as the americans and the british. the bank estimates that the proportion of canadian households that would be highly vulnerable to an

andreas dombret : why business needs values – what we can learn from the banking sector speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the academie kloster eberbach, eltville am rhein, 17 november 2017. * * * 1 introduction ladies and gentlemen it is said that the viennese writer and journalist karl kraus once asked a budding academic what he was planning to study, upon which the young man said, “ business ethics. ” to which kraus replied, “ one or the other, you can ’ t have both. ” this brief exchange rather neatly reflects a view held across much of our society – that business and ethics are irreconcilable rivals at opposite ends of the spectrum. it is widely thought that the banking sector, more than anywhere else, bears testament to this idea of business being an ethics - free zone. and who could blame them for thinking that way? after all, financial crises and scandals – like the one in which banks colluded for years to rig benchmark rates – don ’ t exactly put the picture straight. in some instances, these scandals were rooted in unethical behaviour. court rulings, fines and an exodus of customers are a stiff price to pay for this conduct, not least for the banks themselves. every single scandal, every single crisis, adds to the chorus of voices calling for more regulation, more supervision. could supervisors, they say, not make sure that ethics are anchored once and for all in the business world? and it's true that, in some instances, banking supervisors are increasingly encroaching on this ethics debate with some of the steps they take. there are two new ways in which we do this which i would like to discuss in greater detail during the course of my speech. to make sure we ’ re not talking at cross purposes, i ’ d like to take a minute to share with you my understanding of ethics, or values, and ethical behaviour. for the purposes of this speech, values, for me, are behavioural anchors, or characteristics and qualities that are considered worthwhile and morally sound. honesty, solidarity and responsibility are just some of the values i could mention that most would regard as worthwhile. my definition of ethical behaviour, meanwhile, is behaviour that embraces those very values. i would like to spend the next few minutes answering the following questions : why should banking supervisors be interested in