Risks  ▪ Risk from external shocks that may threaten price stability ▪ Risk of misjudging macroeconomic projections ▪ Risk of changes in the behaviour of banks that may compromise the transmission of monetary policy to market rates ▪ Risk of liquidity excess or shortage in the banking sector ▪ Risk of bank insolvency ▪ Risk of disruptions in the flow of funds at the interbank or retail level ▪ Risk of risk misjudgement ▪ Risk of compromising trust  The financial sector, central banking, and economic development  Slide 5  ▪ Development is closely associated to financial development, both historically and comparatively across countries ▪ Efficient financial services are essential for an economy to grow and to make growth self-sustaining and inclusive ▪ While advanced economies are characterized by broad and deep financial markets, finance in developing countries is usually fragmented, unstable and costly  Thus, while technologically-supported financial products can potentially improve the quality and speed of financial services to the public or lower their cost, a central bank would focus on how they can influence the risks they face—either to lower or raise them. The financial sector, central banking, and economic development [SLIDE 5] Development is closely associated to financial development, both historically and comparatively across countries. Financial services are essential to channel domestic and external savings to investment, support personal and business projects, cushion risks, and reduce the transaction costs of economic exchanges.
There is hardly any good reason for different risk weightings on similar loans given by a domestic bank and a branch of a foreign bank. With these thoughts on central banks and macroprudential policies, I would remind you that we organize this conference hoping that we shall be able to take something useful away for our further work on financial stability. I would like to thank the program committee for putting together what looks like an engaging program. I wish all of you good luck and hope you shall have fruitful discussions in the next two days. 2  BIS Review 112/2010