If an effective global resolution regime with clearly defined ex ante characteristics were to turn out to be a bridge too far, national authorities may have to fall back on a subsidiarization model, in which global firms would have to establish subsidiaries on a country-by-country basis each with their own capital and liquidity buffers. Such a regime would require greater capital and liquidity as the banks would lose the significant risk diversification benefits gained from operating in many different countries. Such a regime would also presumably make it more difficult for these firms to provide financial services seamlessly to multinational corporations, global asset managers, and others that operate on an international basis. Even in this scenario, however, it would be important to ensure that national resolution regimes could interact with each other in a coherent manner. To sum up, my view is that we live in a globalized world both with respect to the macro-economy and the financial system. But too often we set macroeconomic policy and regulatory policy at a national level, and miss important opportunities to coordinate and make the global economic and financial system stronger overall. We need to understand where greater global perspective is required and we need to apply that perspective consistently across jurisdictions in a timely manner. If we don’t do this, we won’t achieve all the benefits that are possible from global specialization and we will continue to run significant risks with respect to financial stability. Thank you for your kind attention. 4  BIS central bankers’ speeches
Pricing in different forward markets currently gives a slightly divided picture of what direction prices will take. The oil price has risen more than expected and forward rates imply that it may remain at a higher level. At the same time, the world market price for certain foods and metals has fallen in recent weeks, for instance, the price of wheat, meat and aluminium. However, the price of some other foods, such as rice, has risen recently. …but we must nevertheless take a stance But regardless of whether the international price impulses are temporary or more lasting, they must not be allowed to push up inflation permanently! In my opinion, the risk of this has increased in that inflation expectations have risen during the autumn. According to Prospera’s survey in April, however, expectations have fallen slightly. The National Institute of Economic Research’s Consumer Tendency Survey also indicates that households’ inflation expectations have been adjusted downwards since the February report. But expectations are still a little too high, particularly in the longer term. And this was one reason why I voted to hold the repo rate unchanged at 4.25 per cent at our most recent meeting. Other important factors behind my stance were that, according to our forecast, inflation will overshoot the target for a good while to come, at the same time as growth remains fairly robust. Weighing together these factors also indicated that the interest rate may need to remain at its current level for some time to come.