It is therefore not enough for just central bank money to be sound money; bank deposits must be sound as well. When is central bank money sound money? But let us first consider the money that serves as the anchor of our monetary system. These days, central bank money is paper money: 4 there is no defined obligation as regards convertibility into gold, which makes the issuing of money completely flexible. 5 This brings considerable advantages. It allows central banks to adjust supply in line with demand and thus to keep the value of money stable over time. 6 Thanks to this flexibility, in crisis situations a central bank can make an important contribution to damage limitation by supplying additional 2  3 4 5 6  Just over two years ago, the Swiss electorate rejected the sovereign money initiative and its proposed change to a system based purely on central bank money. Prior to the vote, the SNB had also highlighted the disadvantages of such a move. Cf. inter alia Jordan, Thomas J. (2018), How money is created by the central bank and the banking system, speech at Zürcher Volkswirtschaftliche Gesellschaft, Zurich, 16 January, and Jordan, Thomas J. (2018), Why sovereign money would hurt Switzerland, speech at the Swiss Institute of Banking and Finance at the University of St. Gallen, St Gallen, 3 May. In addition to central bank money, the coins issued by the Confederation are also legal tender.
Against this background, it is timely that SEACEN Centre has initiated this course to explore the nature of financial intermediation, the role of financial markets in the allocation of resources and the need for appropriate regulatory framework. As regulators, we need to understand the concepts and the basics of the working, the pricing and trading strategies of the derivatives markets and instruments, how financial entities use them in risk management, as well as their potential impact on financial system stability. But more importantly, in these two weeks, we will benefit from the presence of a number of distinguished speakers that have kindly given up their time to be with us. I hope we will use this opportunity fully. On this note, I would like to thank Mr. Sunil Sharma, Chief, Asian Division, IMF Institute, for his efforts to coordinate this course with the SEACEN Centre and the Bank of Thailand. I trust that this course will be most fruitful and rewarding for all the participants, but above all that the interaction among yourselves will provide an opportunity for you to learn from one another, and strengthen the bonds of friendship that bind the works of our institutions for many years to come.