As experience is gained, our strategy will be reviewed and may evolve, possibly in the direction of greater emphasis on one of the two pillars. However, this has to be a prudent process, since one of the main functions of a strategy is to provide a tool to facilitate the communication of monetary policy preparations and decisions. Continuity is therefore a major feature of any monetary policy strategy. The effectiveness of a monetary policy strategy and related decisions depend to a large degree on the credibility of the institution. Transparent and accountable policymaking can help to build up a reputation and, hence, credibility. Openness, transparency and predictability therefore rank high on the agenda of the ECB and the Eurosystem. Monthly press conferences given by the ECB’s President and myself are an important part of our communication policy. They take place immediately after the first Governing Council meeting each month, thus providing an opportunity to explain our decisions and the basis on which we have taken them, and to answer questions from journalists. As far as I know, no other central bank communicates with the public in such a prompt manner. Communication is and should not be a one-way street. The ECB must also take note of and be sensitive to its environment in order to be effective in its own polices. But, still, monetary policy has to be conducted independently of short-term political considerations.
And I believe that the best way of managing risks is for those concerned, not just the authorities responsible for the maintenance of systemic monetary and financial stability but more importantly also those actually assuming risks, whether as investors or as financial intermediaries, to be alert to them, and to understand that they may have peculiar characteristics. Then there are importantly those innocent parties in society, who are often hard-pressed to make ends meet or struggling to acquire a dwelling place, who could be further disadvantaged if there were monetary and financial instability, should the risks materialise to the extent of causing a shock of systemic dimension. Sub-prime crisis The FIRST such issue is the sub-prime crisis in the United States. The use of the word "crisis" is not an exaggeration on my part, notwithstanding the absence so far of anything approaching a crisis in Hong Kong. It is the word that is increasingly being used in the developed markets and in international finance when talking about the current difficulties in the United States and Europe that originated from sub-prime mortgages. At the risk of oversimplifying something that is really quite complex, let me make a few observations that might help understand what is going on. First, sub-prime mortgages are really mortgages extended to those who are, to put it bluntly and simply, not credit worthy. And as mortgages are assets on the books of the lenders, subprime mortgages are really sub-standard financial assets.