4 See Board of Governors of the Federal Reserve System, The Federal Reserve System: Purposes and  Functions (2018). 5 See remarks by Randal K. Quarles, Early Observations on Improving the Effectiveness of Post-Crisis  Regulation, January 19, 2018. See also remarks by William C. Dudley, Lessons from the Financial Crisis, November 6, 2017. 6 7/8  BIS central bankers' speeches  6 For further discussion, see Ashcraft and Schuermann, Understanding the Securitization of Subprime Mortgage  Credit, Staff Report No. 318, March 2008. 7 See remarks by Lorie Logan, The Role of the New York Fed as Administrator and Producer of Reference Rates ,  January 9, 2018. See also the Alternative Reference Rates Committee. 8 See Financial Stability Board, Final Report on Foreign Exchange Benchmarks, and FX Global Code. 9 For further discussion of supervisory activities, see Eisenbach, Haughwout, Hirtle, Kovner, Lucca, and  Plosser, Supervising Large, Complex Financial Institutions: What Do Supervisors Do? February 2017. For a discussion of the complementarity of supervision and regulation, see Eisenbach, Lucca, and Townsend, The Economics of Bank Supervision, Staff Report No 769, January 2017. 10 For a discussion in the context of misconduct risk, see remarks by Kevin J. Stiroh, Misconduct Risk, Culture and  Supervision, December 7, 2017. See also Chaly, Hennessy, Menand, Stiroh, and Tracy, Misconduct Risk, Culture and Supervision, December 2017. 11 William C. Dudley, Opening Remarks at Reforming Culture and Behavior in the Financial Services Industry:  Expanding the Dialogue, October 20, 2016.
At present, there are few indications of any unusually pronounced imbalances between the real exchange rates of the currencies of the large economic blocs. Looking at their development, it becomes apparent that they are all close to their long-term averages (cf. Graph 1). This suggests that the US current account deficit is not primarily a product of exchange rate distortions. It is mainly due to a comparatively high growth momentum and a low savings rate in the US. Yields in the capital markets continued to fall. While this decline was weakest in the US, yields in continental Europe hit historical lows. In Switzerland, for instance, the yields on ten-year Swiss Confederation bonds reached an all-time low of less than 2%. The extraordinarily low capital market yields reflect the market’s low inflation expectations. During recent months, certain concerns about economic growth have triggered a further decline in yields. Both strong demand for long-term debt securities in industrialised countries (driven by demographic factors) and high savings rates in the emerging markets – particularly in China – have probably also contributed to the generally low level of interest rates. While 2004 was characterised by a steady and uniform decline in credit risk premiums in the different debtor categories, the past six months saw a less even trend in the credit risk premiums of individual bonds. In the corporate bonds area, the market’s attention focused on the two major US automakers.