initiatives. the foreign exchange payments system itself was rock solid, despite the enormous financial turmoil. however, new channels of contagion were revealed in new markets. following the collapse of lehman brothers, a mid - sized u. s. investment bank, in september 2008, the cost of interbank borrowing spiked up to unprecedented levels. the functioning of repo, stock, loan, and derivatives markets seized as collateral values plunged and a panic over counterparty risk swept the financial system. within days, other storied institutions either collapsed or were pushed to the brink. the seizure of the entire global financial system was a very real possibility. the virulence of open global capital flows meant that the response, this time, had to be crafted in days, not decades. g - 10 central banks, including the bank of canada, acted swiftly, by conducting a coordinated 50 - basis - point interest rate cut. then, in a historic meeting, g - 7 countries, including canada, committed to : use all available tools to support systemically important financial institutions and prevent their failure ; and take all necessary steps to ensure that banks and other financial institutions have broad access to liquidity and funding. the g - 7 actions – while absolutely necessary – left the system awash in moral hazard. the need for principles - based policy frameworks once again became clear. the bank ’ s extraordinary liquidity operations met this standard. as the crisis intensified, we introduced facilities anchored to a principles - based framework developed in the spring prior for instance, drexel burnham lambert, bank of credit and commerce international, barings bank, long term capital management. to the lehman failure. total outstandings peaked at $ 41 billion. these are now being unwound consistent with market conditions and our principles. 11 the crisis also revealed grave shortcomings in market structure and regulation. on the former, rather than wait three decades, the bank has already assisted an industry - led process to develop a central counterparty for canadian repo markets. this initiative, which will go live later this year, will help keep core funding markets functioning continuously, including in times of stress. the bank is also very active through the bis in advancing reforms of global margining practices in order to dampen liquidity spirals, consistent with both the findings of academic literature and practical experience. 12 finally, through the g - 20 and the financial stability board, the bank is helping to create a more resilient global financial system. in

bsp works towards creating a stable macroeconomic environment where you can plan, participate, and help propagate the creation and enlargement of wealth, not just for yourselves, but for the greater majority. in particular, the bsp remains committed to staying the course : ( a ) sustain appropriate monetary policy stance to maintain and promote price stability ; ( b ) continue to initiate key reforms to promote financial stability, including financial inclusion advocacies ; and ( c ) pursue measures ( e. g., maintaining a market - determined exchange rate, keeping an adequate level of fx reserves, and managing our external debt profile ) to strengthen resilience against external shocks. the bsp will remain as a catalyst for further development of sustainable and inclusive growth : we will continue to adopt purposeful reforms, aligning our own processes with international benchmarks, while making sure these reforms are relevant to our own domestic needs. as you may have heard me say on numerous occasions in the past weeks, … “ so far, so good. ” …. we have weathered the gfc, the fed taper tantrum, the onset of the fed taper, yolanda and a host of other natural calamities …. we have even weathered geopolitical risks. bis central bankers ’ speeches but this should not lead us to be complacent. the situation could, as they say, “ turn on a dime ”. which is why you and the bsp have to remain vigilant. i mentioned our buffers, i also mentioned the risks. but i want to end these remarks by saying, the bsp will continue to be watchful, implement appropriate and timely reforms and draw from our strengths in confronting the challenges ahead. our support for the development of the country ’ s financial market will not waver … we will continue to be guided by a framework that will not stifle innovation but rather promote market discipline. this is our word, and to borrow investors ’ dictum : “ our word is our bond. ” thank you. bis central bankers ’ speeches