1 Based on those he expressed a view, which I share, that while the recent experience may have made us a bit more confident about detecting bubbles, it has not resolved the problem of doing so in a timely manner, nor has it shown that small-to-modest policy actions will reliably and materially dampen speculation. An extra policy reaction to changes in asset prices thus still remains questionable. The second frontier to be mentioned tonight is related to the monetary policy implementation, current situation on the money market and financial stability of the banking sector. For years the monetary policy implementation was not an issue and central banks were able to tighten the short-term money market interest rates such as for instance 3M PRIBOR closely to the key policy rate. Unfortunately, this changed in August 2007 for the US interest rates when the 3M LIBOR for the US dollar denominated funds started to deviate significantly from the Federal Reserve target for funds. A year later following the second round of the financial crises that peaked during the bankruptcy of Lehman Brothers also the Czech short-term money market rates started to elevate well above our policy rate, the two week repo rate. 1  Quoted from speech of Vice Chairman Donald L. Kohn: “Monetary Policy and Asset Prices Revisited” at the Cato’s Institute 26th Annual Monetary Policy Conference, Washington, D.C., on November 19, 2008.
The EU’s new Markets in Financial Instruments Directive (MiFID), for example, is expected to bring about important changes and intensify competition in the European financial market. This development will also influence the future of financial market infrastructures in Switzerland. Against this background, it is certainly crucial for the Swiss financial market infrastructures to persistently foster their competitiveness. They have pursued this strategy so far, and will need to continue doing so in the future. BIS Review 87/2006  1