lowered the target federal funds rate in a timely, decisive, and flexible manner to help mitigate macroeconomic risk. although financial disruptions present one of the most difficult challenges that central banks can face, i believe that these measures have been appropriate for achieving our macroeconomic objectives of promoting price stability and maximum sustainable employment. references bernanke, ben s. ( 2008 ). " financial markets, the economic outlook, and monetary policy ", speech delivered at the women in housing and finance and exchequer club joint luncheon, washington, january 10. board of governors of the federal reserve system ( 2005 ). " the implementation of monetary policy ", in the federal reserve system : purposes & functions. washington : board of governors of the federal reserve system, pp. 27 - 50. board of governors of the federal reserve system ( 2007a ). " the federal reserve is providing liquidity to facilitate the orderly functioning of financial markets ", press release, august 10. board of governors of the federal reserve system ( 2007b ). " federal reserve board discount rate action ", press release, august 17. board of governors of the federal reserve system ( 2007c ). " federal reserve and other central banks announce measures designed to address elevated pressures in short - term funding markets ", press release, december 12. mishkin, frederic s. ( 1991 ). " asymmetric information and financial crises : a historical perspective, " in r. glenn hubbard, ed., financial markets and financial crises. chicago : university of chicago press, pp. 69 - 108. mishkin, frederic s. ( 2007a ). " financial instability and the federal reserve as a liquidity provider ", speech delivered at the museum of american finance commemoration of the panic of 1907, new york, october 26. mishkin, frederic s. ( 2007b ). the economics of money, banking, and financial markets, 8th ed. boston : addison - wesley. mishkin, frederic s. ( 2007c ). " financial instability and monetary policy ", speech delivered at the risk usa 2007 conference, new york, november 5. mishkin, frederic s. ( 2008 ). " monetary policy flexibility, risk management, and financial disruptions ", speech delivered at the federal reserve bank of new york, new york, january 11.

the market can expect greater transparency in the conduct of monetary policy and this should reduce the gray areas in anchoring public expectation about inflation and enhance the functioning of the markets. strengthening the financial system in the financial sector, the main challenges emerged from the overhang of the asian financial crisis and the greater integration of the philippines into the global financial system. in response, we have addressed these challenges precisely by strengthening the financial sector. focus has been given to maintaining a sound and viable banking system and the development of the domestic capital market. efforts in this area have begun to show positive results. banks ’ balance sheets are gradually recovering from the large burden of bad loans while the local bond market has received the initial shot from the reforms that include the now operational fixed income exchange. we shall sustain the bangko sentral ’ s reform strategy on cleaning up banks ’ balance sheets, addressing remaining weaknesses in managing risks, and ensuring that our prudential regulatory standards are elevated to international benchmarks. we shall also continue to coordinate with other government agencies and the private sector in installing the remaining infrastructural requirements of a well - functioning capital market that would diversify our sources of funds and reduce our vulnerability to various shocks. but we need to enhance a few things even as we have started to launch them. we are moving into consolidated supervision and risk - based approach to bank examination that are aligned with international best practices. such innovations are necessary to allow regulators to effectively manage challenges posed by conglomerate structures and cross - border issues. we are improving corporate governance and market discipline. a crucial element for effective oversight of the banking system is for the regulator to have stronger supervisory and regulatory authority and this can only be done with the support of congress in amending the bsp charter. finally, we realize that the bsp can enhance its effectiveness by establishing teamwork with the other financial regulators. thus was born the financial sector forum ( fsf ) that has elevated the cooperation among the regulators to pioneering levels. the fsf will help harmonize supervisory and regulatory efforts, improve the exchange of information among regulators and promote better consumer protection. in the area of promoting the domestic capital market, the changes we would like to see are the fruits of the steps that have already been started in close collaboration with the private sector. we shall be pleased to see more robust trading of government and subsequently, private, debt securities at the fixed income exchange, improved market confidence from the use of independent custodians, migration by the banks from