are marginally bankable. it is also about combining financing with capacity building, technology transfer, and institutional support, to reduce risk and enhance bankability. in short, it is about taking an ecosystem approach to solving a problem of the global commons. blended finance is not new but catalysing and scaling it requires a fresh approach. the use of public funds and development guarantees to reduce risks and encourage participation by private capital has been around for many decades. but such programmes are too few and too small. globally, annual flows of blended finance have averaged less than us $ 10 billion since 2015. we need a more systematic and coordinated approach to mainstream blended finance. first, we need to build a pipeline of shovel - ready transition projects. there is insufficient capacity and expertise to prepare projects that are attractive to the private 2 / 4 bis - central bankers'speeches sector. this is specially so in emerging markets, where regulatory and political risks heighten the likelihood of default, transaction lead times are long, projects require prohibitively large amounts of start - up capital, and there is limited access to expertise in project development and financing. second, we need to reduce the risks in marginally bankable transition projects to attract private capital. the return profile on many such projects is not commensurate with the risks facing private financiers or investors. to reduce overall risk and improve bankability, we need more catalytic and concessional funding from the public sector, multilateral development banks, and philanthropic sources. such funding can be in the form of grants, risk - sharing arrangements, debt at below - market rates, technical assistance, and structuring advice. they can help crowd in additional multiples of private sector funding. but while public capital can potentially do more to mitigate risk, private capital must still bear a fair share of project risk and exercise the appropriate due diligence on project viability and performance. third, we need to make the financial ecosystem work more synergistically. banks play a key role as lead managers for financing sustainability projects. however, with limited balance sheets and regulatory capital and liquidity requirements, banks need to offload these loans to institutional investors who have more absorptive capacity. but institutional investors prefer larger deal sizes with a diversified pool of assets to reduce concentration risk. we need to shift towards a portfolio approach to blended finance deals, through the structuring and securitisation of typically illiquid green and transition assets. there are some promising global

stanley fischer : monetary policy in the united states and in developing countries speech by mr stanley fischer, vice chair of the board of governors of the federal reserve system, at the crockett governors ’ roundtable 2015 for african central bankers, university of oxford, oxford, united kingdom, 30 june 2015. * * * i would like to thank the organizers of the conference for inviting me to this event. 1 i have been invited in the past and had very much wanted to take part – especially in light of my having been born in zambia and having received my schooling in zambia, south africa, and zimbabwe – but somehow it never worked out. i am therefore especially delighted finally to be here. in my talk today, i will focus on both the challenges facing the federal reserve and those facing central banks of developing countries in our increasingly interconnected world. but let me begin my remarks with a very brief digression on the history of central banking to put recent developments in context. historical context today the great majority of countries have a central bank or an institution that fulfills the functions of a central bank. but this was not always the case in the past. even after the advanced economies began to set up central banks, it was not widely accepted that smaller nations needed one. although the first central bank, the swedish riksbank, dates back to 1668, it was only in 1920 that the case for setting up a central bank in almost all countries was recognized among official circles in a resolution of the league of nations ’ conference in brussels that year, which stipulated, among other things, that “ in countries where there is no central bank of issue, one should be established. ” 2 at the time, the main concern of the participants in the conference was the preservation of the international monetary order, by which was meant the possibility for both the private and public sectors of all countries to engage in domestic and international transactions. since then, as it has become increasingly apparent that central banks can fulfill many functions, the number of central banks has expanded from 23 in 1920 to over 160 currently. and not only are there more central banks, but also the functions of central banks have continued to evolve. until the great financial crisis, both the practice and the theory of modern central banking revolved around the inflationary tendencies inherent in the conflict between the short - and long - run effects of monetary expansion and in the temptations of monetary financing of government spending. 3 taking into account the fact that many leading central banks have