in the coming years. i would now like to take a step further and focus on the link between implementation and how the system should be calibrated. because my view is that there are a number of trade - offs at play here, which need to be taken into account. for instance, if we don ’ t implement the necessary changes and succeed in properly restoring the credibility of risk - weighted capital ratios, a more important role will have to be played by other parts of the regulatory system, such as the leverage ratio. for now, our working hypothesis is a regulatory level for the leverage ratio of 3 %, but to me this is more of a placeholder. what the final outcome should be will depend on the calibration of the whole system, in which the risk weights and leverage ratio are important pieces. by end - 2014 it is expected that all jurisdictions with gsibs will have been assessed, in addition to some others ( total 17 countries ). by 2016, all basel committee member jurisdictions are expected to have gone through the assessment of their capital framework. bis central bankers ’ speeches an important element in this calibration will be transparency – the more trans - parent banks are with methods and models to calculate risk weights, the better it will be for the credibility of the system as such. if we widen the perspective further, i think there is also an interesting issue of calibration linked to the concept of going - concern capital requirements on the one hand, and goneconcern capital requirements on the other. when we discuss appropriate levels of t - lac we should keep in mind that the less we strengthen the credibility of the system for going concern capital requirements, the higher banks ’ gone - concern capacity to absorb losses will have to be. concluding remarks so, to wrap up : i see no reason to pull the brake on regulatory reforms. we mustn ’ t lose sight of the long - term benefits of limiting the costs to society that financial crises cause. and, although a lot has been achieved, challenges still remain – especially when it comes to implementation, implementation monitoring and calibration of the whole system. as i said earlier, i do not know how all the different parts of the reforms will play out together. this only further underlines the necessity to constantly monitor what is happening, very much in line with what the organisers of this conference are doing. and as financial systems have an amazing ability to reinvent themselves, regulatory reform is a never - ending task

the low interest rate was reasonable given the available information, is the relevant one when evaluating monetary policy. it is more relevant to evaluate policy taking into account the information available ex ante to the policymaker rather than information ex post that was unknown to the policymaker ( see svensson 2009 on evaluating monetary policy ex ante and ex post ). 8 during this time, given the information available, there was a genuine and well - motivated fear of the u. s. falling into a japanesestyle deflationary liquidity trap, and the optimal policy in such a situation is a very expansionary monetary policy. 9 it may be that, in retrospect, the risk of deflation was exaggerated, but it was impossible to know this ex ante. hence, i consider the expansionary policy very appropriate and, adding some ex post evaluation, one can note that it did not lead ex post to very high inflation and an overheated economy. the second question, whether a different monetary policy could have prevented the crisis, is relevant when assessing to what extent monetary policy can be blamed for causing the crisis, notwithstanding if it was reasonable from an exante perspective. the credit growth and the housing boom in the u. s. and elsewhere were very powerful. however, i believe that somewhat higher interest rates would have made little or no difference. in order to stop the credit growth and housing boom, interest rates would probably have had to be raised very high so as to cause considerable damage to the real economy. they could have thrown the u. s. right into japanese - style deflation and eventually a liquidity trap. certainly higher interest rates would have had no impact on the regulatory problems, distorted incentives and information problems mentioned above ( although they could have ended the great moderation with a deep recession and deflation ). 10 however, perhaps it is possible that the fed ’ s emphasis on its readiness to relax monetary policy aggressively in the wake of a sharp fall in asset prices ( greenspan 2002 ) may have induced expectations of a floor under future asset prices and contributed to the asset - price boom ( the “ greenspan put ” ; see miller, weller and zhang, 2002 ). arguably, this is more a communication issue rather than one of actual policy, and less emphasis on the readiness to clean up after a sharp fall in asset prices might have been a preferable alternative. 5. conclusion : does flexible inflation targeting need to be modified in light of the crisis? what conclusions