a post - crisis period, and sine qua non for long - term stability. therefore in our case, the current context of transition towards a steady state, the classical economic policy dilemma of rules versus discretion cannot be solved with an extreme option. both “ unrestricted discretion ” and a rigid “ lock - in ” rule lead us nowhere. in contrast, an intermediate scheme – the monetary aggregate approach, combining a dose of flexibility ( such as indicative inflation targets ), with simple rules on the growth of money supply providing the adequate accountability by the policymakers – may gradually rebuild the credibility lost in the crisis without loosing the necessary discretion to address the contingencies inherent to this stage. we definitely cannot “ take shortcuts ” : we need to develop and calibrate the instruments with capacity to stabilize cyclical fluctuations and, in turn, reduce macroeconomic risks. one of these tools is a deep domestic financial system and the capital market. we are working to rebuild credit to the private sector as a monetary policy transmission channel as our financial markets are not deep enough to channel large capital inflows. local currency debt markets are still in their infancy, and secondary markets are not liquid enough. yesterday afternoon, rajan himself pointed out the financial systems ’ inability to efficiently intermediate foreign savings as an obstacle for economic growth in emerging economies. the development of the market in domestic currency, as malcolm knight pointed out, allows a reduced dependence on capital flows, diminished currency mismatches, and a lesser concentration of risks in banking systems. but here we should also be cautious, all the more so at a stage when monetary stability and confidence in the local currency are gradually recovering, so as to avoid reducing currency mismatches at the expense of assuming an excessive maturity mismatch risk, or to avoid flooding local investors with instruments that restrict the possibility of risk diversification. we applied strict guidelines to reduce financial system exposure to the public sector. consequently, in the past years the share of credit to the government in total assets decreased by 20 percentage points, fast reversing the crowding - out process of credit to households and firms. in fact, these kinds of financing are today the main component of financial institutions ’ assets and the focus of their business. anyhow, we see that every country in the region is taking precautions. in our case, for an economy in transition towards its long - term cruising speed, foreign reserve accumulation is an extremely useful countercyclical policy. i have referred to

martin redrado : financial stability and the importance of aml / cft supervision and regulation speech by mr martin redrado, governor of the central bank of argentina, at the fiba annual aml compliance conference, miami, 13 february 2007. * * * all of us in this room share a vision about the need for regional integration. efforts include forums like this one for discussion about opportunities and shared challenges in different spheres of action at the regional level. in my view, these efforts represent an effective mean of adopting international standards and adjusting them to the realities of the continent. regional agreements are extremely valuable as a way of consolidating the implementation of a uniform set of best practices. for those of us who, on top of being central bankers, are also bank supervisors, we must increase our efforts to incorporate the advantages of international standards, with the fundamental addition of a regional perspective. this means a thorough knowledge of the reality of each region to take into account the factors that affect its dynamic. regional realities evolve, and regional demands do not necessarily match the original design and development of international standards. let me give you a practical example : as an international standard, consolidated supervision has existed for over thirty years. the situation with quantitative supervision is pretty much straightforward : standards are uniformly and widely applied. however, there are gray areas on qualitative supervision ( that is the impact on risks of related non - financial activities ), where standards are just being developed and, therefore, the implementation as a tool for supervision is under debate. another concrete case is the implementation of the basel ii accord on capital requirements, particularly on how to compute capital requirements for operational risk ( that is the risk of loss resulting from inadequate processes and systems, or from external events ). we have dedicated sizable resources to managing market and credit risks, and those were wellknown, narrowly - defined. operational risk was anything but well defined since there is a lot of disagreement about the specific contingencies that should be considered under this umbrella. in the basic approach banks must hold capital for operational risks equal to the overall average over the previous three years of a fixed percentage of annual gross income. now, in the standarized approach, banks ’ activities are divided into several business lines : corporate finance, sales & trading, retail banking, commercial banking. operational risks should be considered for these particular lines of business. in latin america, stress tests determine relatively high regulatory capital charges for operational risk, based on the alternatives foresee