And, we must continue to devote sufficient attention and resources to complete the efforts. At the same time, though, it is important to take stock of the changes made over the past few years – for two important reasons: first, to assess the impact of those changes, both intended and unintended; and, second, to understand the contours of the “new” financial system operating under the range of new rules and regulations, both national and global in nature. Such a stocktaking is important to  BIS central bankers’ speeches  1  ensure that we collectively understand how the “new” financial system is operating. Firms and supervisors will continue to face challenges and competing demands as we press, in the months and years ahead, on implementing necessary changes and assessing the “new” financial system. What the future holds One of the topics that I feel will compete for, and will deserve, a lot of attention in the foreseeable future is cybersecurity. I am often asked about my list of “things that keep me awake at night,” and I think it’s fair to say that cybersecurity is at the top of that list – as I’m sure it is for many of you in this room. In fact, I think cybersecurity is one of the topics that should be on everyone’s list – from the most senior managers and boards of directors, all the way down to line managers.
BIS Review 37/2004  1  “circularity problem”, a difficulty encountered by every central bank faced with a signal extraction problem, in particular when it tries to get information from asset prices. Let me now turn to my first point:  1. What is the information content of inflation-indexed bonds and why is it relevant for a central bank? Over the past decade, policy makers have come to rely on long-term bond yields to measure the public’s long-term inflationary expectations. According to some empirical research3, “almost 80% of the movement in the long nominal rates appears to be due to changes in expected long-term inflation”. According to the Fisherian theory of interest rates, the long-term nominal interest rate depends upon the ex-ante real interest rate and the expected long-term inflation, factoring in an inflation risk premium. The main problem for the central bank is that, in practice, these three components are unobservable. In this respect, the central bank faces a signal extraction problem, which has important implications in terms of monetary policy decision-making. I will mention three of them. First, aggregate spending decisions are generally viewed as more closely related to long-term [real] interest rates. This implies that changes in short-term interest rates, used as the operational target for implementing monetary policy, will only affect aggregate spending decisions if they impact long-term interest rates. Under this rationale, the term-structure of interest rates and the relationship between long-term interest rates and long-term expected inflation becomes central to the design of monetary policy.