. this does not mean, however, that all banks are ready and able to meet the standard today. even though the industry average is well above the minimum, our estimates suggest that roughly one - quarter of our sample could still have an lcr below 100 % even with the latest policy changes. so there remains a significant liquidity shortfall that will need to be addressed by a number of banks. one also has to bear in mind that favourable terms from central banks have helped to improve bank funding. central banks serve as lenders of last resort and, as economic conditions improve, banks will need to become more self - reliant. however, the timetable for the gradual introduction of the ratio ensures that the new liquidity standard will in no way hinder the ability of the global banking system to finance a recovery. it has taken a lot of time and effort to reach agreement on the lcr. it is, as i said, a deceptively simple idea, but its implications are big and far - reaching. unsurprisingly, there is much in the detail that required a lot of careful analysis and thought, not to mention a willingness to find a way through differing national perspectives. it is, however, critical that the new ideas such as the lcr ( and the other new features of basel iii such as the capital conservation buffer, countercyclical buffer, leverage ratio and nsfr ) are implemented if their benefits are to be realised. against that background, let me now turn to the work we have started to ensure that the basel iii framework is implemented as intended. bis central bankers ’ speeches …. to implementation steady progress is being made. as of january 2013, 11 out of 19 basel committee jurisdictions have final basel iii rules in place, including our hosts today, south africa. a number of non - member countries also implemented basel iii at the beginning of the year, further expanding its coverage. while it would be ideal to have much broader coverage at this time ( as at today, around one - third of global banking assets are officially subject to the basel iii requirements ), the delays should not be interpreted as any lack of commitment by global regulators to implement the agreed reforms. at recent international gatherings, all members have been asked to reaffirm their commitment to implementing the agreed reforms as soon as possible. and they have given that commitment ( subject, of course, to the vagaries of domestic rule - making processes that each must follow ). nevertheless, let

is important to give a detailed report of when such factors are taken into account. this is a strategy the riksbank follows. so far, the riksbank has not found reason to take account of what happens beyond the normal forecast horizon when formulating its monetary policy, although it does normally produce surveys of the economy for longer periods. however, i have argued on several occasions in 1999 and 2000 that there was reason to raise the instrumental rate, taking into account the effects in a longer term perspective. nevertheless, asset prices should not be included in the formulation of monetary policy targets. there is otherwise a risk that the central bank would counteract adjustments that were fundamentally motivated. this would reduce the efficiency of the resource allocation and probably subdue growth. other measures in addition to price stability, most central banks have a responsibility for financial stability. according to a narrow definition, financial stability is equal to a lack of crises in systemically - important banks. the banks have important functions with regard to the payment system and the supply of capital. it is easy to see that without an efficient payment system and capital supply the economy would be unable to function. monetary policy would have no effect in this situation. large shocks to the functioning of the financial system would also reduce the effectiveness of monetary policy, as the transmission mechanism is affected by the efficiency of the capital supply and the mediation of payments. the fact that there are close links between the central banks'two tasks becomes particularly evident when the effects of financial bubbles are discussed. an important part of the process leading up to large imbalances is credit granting by the banks. the fact that households and companies demand loans for increased consumption and investment when asset prices are rising is one thing, but it also requires that the banks increase their supply of loans. if the banks have well - developed risk systems, and rules and supervision are designed to motivate the banks to utilise them, the risk of exaggerated lending will be reduced. the way that capital adequacy rules are designed and applied is of great significance. the new capital adequacy rules, basel 2, are aimed at reflecting to a greater extent than now the risks the banks actually take. however, valuating credit risks over a whole economic cycle is very difficult. the indications are that both internal credit risk models and credit rating agencies tend to underestimate credit risks during an upturn in economic activity and to overestimate them during a downturn. there is thus a risk that