crisis of 1995 in terms of the magnitude of outflows, but had a mild impact on domestic variables. the monetary and financial system truly protected it against financial contagion. a true example of our risk management approach is the recovery of banking liquidity and solvency. due to an improved regulatory framework, we developed a sound financial system. another of the achievements of the financial policy implemented by the central bank has been the reduction in exposure to the public sector, which currently accounts for only 14. 6 % of assets, almost 36 p. p. below the maximum reached in the period following the crisis in 2001 - 2002. the setting of a global cap of 35 % on this exposure since july 2007, as well as maximum limits on the basis of bank capital and the jurisdiction of their operations, and the elimination of the bias in capital adequacy requirements, among other measures, made it possibly to definitively crowding - in the private sector. balance sheet normalization was also reflected in bank liabilities, as deposits by the private sector have become the sector ’ s main source of funding. currently, the liquidity rediscounts granted by the central bank during the crisis have almost disappeared from bank balance sheets ( amounting to only 0. 4 % of financial system assets ). our risk management approach addressed three basic aspects to deal with the crisis : preserving sufficient liquidity, foreign exchange market stabilization, and regulatory changes to soften the impact of turbulences on the financial system. the liquidity stress caused by international financial volatility in the local market was dealt with through measures such as buying back part of the central bank notes directly, or auctioning floating - rate and then fixedrate repos – distributed among institutions according to their market share, and extending their terms from 7 to 30 days. the u. s. dollar has historically represented a safe haven for argentinians in times of uncertainty. therefore, to curb depreciation expectations by acting in the foreign exchange market has positive implications, not only for money market expectations but also for financial system stability. thus, we have demonstrated that the current managed floating exchange rate regime is the most appropriate at this time of our economic history. regarding the fx market evolution, the right question to ask is : what would have happened under the same circumstances but with a pure floating exchange rate regime in place? the timely intervention curbed depreciation expectations and, thus, the potential pressure on prices with minimal use of reserves. i

and still lasts in both countries. the recovery in economic activity took four quarters to show up an increase in year - on - year terms. notwithstanding, yearly gdp growth rate averaged roughly 9 % since the recovery begun. a common feature of emerging market crisis is a sharp depreciation of its currencies. in these episodes, the usual “ overshooting ” phenomena took place, with fx depreciating in real terms 68 % in argentina and 46 % in russia. but, as economies begun to stabilize, currencies entered a process of appreciation in real terms, reducing almost half of the initial jump. also, economic activity recovered on the backup of strong export performance, fueled in part by commodities prices. oil prices begun to increase in 1999, giving a strong boost to russian economy, and agricultural quotes picked up from 2003, pushing up activity in argentina. this was the seed for a strong process of foreign reserve accumulation, which allowed for both countries to almost triple stocks in three years since the worse of the crisis. one of the main drivers of the crisis was banking system. a common feature of those years was the heavy burden of public sector debt on banks balance sheet. although in russia the collapse was mainly driven by a sort of sudden stop that made impossible to keep rolling over short term public debt, in the case of argentina, private deposit withdrawals did the job. at the end of the day, we can state in both cases that inconsistencies between fiscal ( unsustainable public debt dynamics ) and exchange rate policy ( overvalued real exchange rates ) in a context of diminished global liquidity ended up in a crisis. but as well as in the case of fx, terms of trade, reserve accumulation and gdp growth, the recovery took place at a remarkably fast pace. even though our monetary policy designs were alike during the aftermath of the crisis ( e. g. control of money growth and managed floating exchange rate regime ) we, both, still have a long way to go. there are many pending issues to deal with over a longer horizon such as further deepening of local financial markets, strengthening fiscal and monetary institutions. meanwhile, find our way out of current domestic tensions derived from high prices in commodities markets is definitely a more immediate source of concern. to sum up, policy makers around the globe face key dilemmas. while challenges are significant, now we seem to understand that policy recipes vary from one country to the other in this complex scenario. this progress