But the steep rise in implied future yields five years ahead suggests that inflation is expected to be higher in the medium term. That could be associated with expectations of softer macro-economic discipline, perhaps more specifically reflecting market uncertainty about EMU in the light of the ongoing debate about prospective membership and about how far the ECB will in practice be free to pursue its statutory task of maintaining price stability. It may, on the other hand, simply reflect some kind of market imperfection. The same analysis can be applied to Italy and Spain, for example, to try to assess market expectations about their possible membership of EMU as part of the first wave. It shows that notwithstanding the recent falls in short-term interest rates in those countries - which can largely be explained by their improved economic performance - 5 years forward yields remain significantly higher than those in Germany and France suggesting that early EMU membership is not at all certain in the eyes of the markets. BIS Review 22/1997  -4-  What can we conclude from all this, Mr. Chairman? Well, the conclusions that I draw are essentially threefold and hardly very surprising. I conclude, first, that markets at present are reasonably persuaded that the world economy as a whole will remain relatively stable at least by comparison with much of the post war period.
These events, along with the reversal of certain losses previously charged to equity and the effect of these adjustments on the corporate income tax charge, mean that we can anticipate a notable decrease in net worth, which, however, will remain positive. In sum, I have to inform you that the final adjustment figures are not yet available. Nonetheless, I can assure you that they are substantially lower than some of the figures that we have heard in the last few days. Also, the submission of the annual accounts by the provisional central bank nominees has been postponed in application of the powers established in Article 36.2 of Law 26/1988 of 29 July 1988 on the Discipline and Intervention of Credit Institutions, since it has been considered preferable to await the conclusions reached in the inspection now drawing to a close. With regard to liquidity, the turmoil of the last few months put CCM in a difficult position: •  Wholesale financial market tensions and the downgrading of CCM’s credit rating closed the door to institutional funds. This lack of access to funding via wholesale  BIS Review 42/2009  3  markets was particularly painful for it, as it had resorted extensively to this source of funds for its business expansion plans. •  The institution’s gradual deterioration was common knowledge and increasingly the subject of political and media discussion. This adverse publicity gave rise to a drain on deposits.