not necessarily move to equilibrium. government intervention is necessary to achieve stability. macroeconomic policy alone was not sufficient to prevent the crisis, especially in advanced economies. regulation should be one element alongside macroeconomic policy instruments : before the crisis systemic risk was not trivial, it was latent, and it turned out to have been extremely costly to have neglected this variable. price stability is not a sufficient condition to guarantee financial stability ; the relationship between monetary and macroprudential policy should be taken into account. what is required is : proper risk management, awareness of procyclicality and of how risk is distributed, removing the notion of banks as “ too big to fail ”, surveillance and individual and systemic risk assessment, and awareness of credit growth. 2. recent reforms and macroprudential regulation i will only briefly summarize stylized facts, since throughout the conference we will dig deeper into these issues. the establishment of the financial stability board within the g20 framework was an excellent initiative, as was taking into account macroprudential risks and the establishment of anticyclical capital buffers and a capital conservation buffer, among others. some additional work was also undertaken by the obama administration, in particular updating the legal framework of the federal reserve and exit rules for big banks ; enhancing consumer and depositor protection ; strengthening deposit insurance ; regulating derivatives markets ; requiring a higher level of capital for banks ; and improving control over credit rating agencies ( which ahead of the crisis did not work properly and could not send early warnings to the markets ). there was, and still is, a debate about taxing banking activity, for instance in the u. s. and europe. germany is assessing how to handle the social cost of future financial crises and possible government intervention. we must decide who will face the burden of future crises. hence the current debate on taxing banking activity – although it is important to keep in mind a global tax, since a mere national tax may lead to disequilibrium. the level of tax for each country may be dependent on risk and the size of the financial system. we must be very diligent in this, since imposing taxes does not in itself eliminate the possibility of future crises, and coordination among countries may be required. regarding the reforms to the capital adequacy framework, known as basel iii, one lesson drawn from the crisis was that financial institutions ’ capital was not enough to protect them from losses. currently, banks have to keep a tier 1

##es en la supervision macroprudencial ”. cemla - lxxxix meeting of central bank governors of latin america and spain. 13 – 14 may 2010. buenos aires. argentina. as can be noted, the bolivian financial system has sound capital, adequate asset quality and profitability ratios, as well as good ratios of deposits and loans in local currency relative to foreign currency – which is something i would like to highlight. the bolivian case is still the one of a highly dollarized economy. financial dollarization, i. e., deposits and loans in foreign currency, used to be around 90 % of total deposits and loans. as a result of close coordination among the central bank, mefp and asfi, the ratios of loans and deposits in domestic currency over total loans and deposits are, for the first time in several decades, a little higher than 50 % for loans and close to 50 % for deposits. banks ’ foreign currency liabilities are less than 3 % of total liabilities due to low involvement in international financial markets, as explained before. in bolivia we view financial regulation as important. the prudential regulation measures taken by the central bank of bolivia have improved in recent years and have been closely coordinated internally ( monetary and exchange rate policies ) and with the mefp and asfi. the challenge ahead is to give this coordination a more formal framework. what are the decisions we should make to arrive at coordinated results and decisions? on the one hand, our experience is based upon a sound macroeconomic policy : current account and fiscal surplus, price and foreign exchange stability. on the other, microprudential analysis is performed with emphasis on individual entities, while we also perform macroprudential analysis, for example, our financial stability report, which includes an analysis of stress tests. the following chart uses an approach presented by the governor of the central bank of argentina at the conference “ jornadas financieras y bancarias 2010 ”. it is based upon the following variables : current account, financial regulation, exchange rate flexibility, monetary policy, fiscal policy and net foreign asset accumulation. as can be seen, before the crisis, emphasis was on monetary policy and exchange rate flexibility. the exchange rate was endogenous and little progress was made in capital account and financial regulation ; net foreign asset accumulation and fiscal policy were not that important before the crisis. bolivia, before the crisis, had a broader scope on these issues. exchange rate stability and net foreign asset