which repealed most of the federal prohibitions on interstate banking, set the foundation for establishing efficient, national retail banking and payment arrangements. if the us banking structure is the foundation of the retail payments system, the cornerstone is the competitive market model for payment system operators. the monetary control act of 1980, or mca, codified the use of the competitive market model for the us payments system with the central bank as a provider of services. prior to that act, only federal reserve member banks were permitted to use the federal reserve's ( free ) payment services. nonmembers typically cleared checks through a network of upstream correspondent banks that were federal reserve members. the mca confirmed the federal reserve's role as a key provider of services and required the federal reserve to provide payment services to both member and nonmember banks. most importantly, the mca required the federal reserve to price its payment services and to fully recover the costs of providing those services, including imputed taxes and profits. the purpose of this requirement was to avoid having the central bank underprice payment services in a way that would undercut the existence and growth of private - sector alternatives. the ultimate goal was to stimulate efficiency and innovation by encouraging competition between service providers and payment system operators, including the central bank. the legal framework governing payment systems has continued to evolve. in its role as catalyst for payments system improvements, the federal reserve has worked with the private sector to identify 2 / 3 and address barriers to improvements in payments system efficiency. it then developed legislative recommendations that eventually became the check clearing for the 21st century act, known as check 21. check 21, which became effective in 2004, eliminated legal impediments to the use of electronic technologies to collect checks. under check 21, banks no longer need to physically move original paper checks from the bank where the checks are deposited to the bank that pays them. the law created a new negotiable instrument called a substitute check, which permitted banks to truncate original checks, to send digital check images across the country, and to deliver paper substitute checks to banks that wanted to continue receiving paper checks. as a result, checks will ultimately be collected faster and at lower cost through an electronic national clearing structure. consumer behavior and market response in the future us payments system the development and adoption of new payments instruments is largely being influenced by consumers, merchants, and their banks and service providers interacting in a market setting. until very recently, checks have been the dominant form of noncas

since the enhancement of the mortgage stress test, as there has been a significant decline in new mortgages above 450 percent of disposable income. further, we have not seen evidence of froth in major housing markets for some time now. however, the recent strength in many housing markets across the country is a reminder that we will be carrying high levels of debt for a long time, despite a constructive evolution of vulnerabilities. it is with this context in mind that governing council considered whether the downside risks to the canadian economy were sufficient at this time to warrant a more accommodative monetary policy as a form of insurance against those risks, and we concluded that they were not. in this setting, we discussed whether such insurance may come at a cost, in the form of higher financial vulnerabilities and possible consequences for the economy and inflation in the future. we agreed that the new mortgage rules in place limit this cost, but the situation will require continuous monitoring. moreover, the fact that inflation has been on target and is projected to remain near target means that we can weigh the upside and downside risks to inflation more symmetrically. governing council is mindful that the resilience of canada ’ s economy will be increasingly tested as trade conflicts and uncertainty persist. in considering the appropriate path for monetary policy, we will be monitoring the extent to which the global slowdown spreads beyond manufacturing and investment. in this context, we will pay close attention to the sources of resilience in the canadian economy, notably consumer spending and housing activity. we will also be watching for any changes to fiscal policy at the federal level now that the election is behind us. with that, senior deputy governor wilkins and i will now be happy to take your questions. 2 / 2 bis central bankers'speeches