Regulation must not stifle markets but seek to make them work better. In the financial sector, this means a judicious mix of rules and incentives for stronger capitalisation, more effective risk management, better transparency, and sharper market discipline. This has been central to the approach taken by the Monetary Authority of Singapore – never hesitating to impose high standards of prudence and financial discipline but always careful to do so in a manner that does not undermine enterprise and innovation. 11. Financial innovation – especially in derivative products – has been blamed as a cause of the crisis. This is not quite correct. Innovation has been a feature of finance for decades. The crisis was caused fundamentally by failures in macroeconomic policies and financial supervision. Monetary policy was too easy for too long in too many countries. This led to low interest rates and lax lending standards that precipitated unsustainable housing booms, mainly in the United States but also in other countries. Financial supervision failed to detect and correct the build-up of leverage in the system, especially in the shadow banking sector. Complex financial products obscured the risks in sub-prime lending and transmitted these risks across the financial sector. As Edwin Truman from the Petersen Institute puts it, “Financial engineering contributed to the market dynamics once the crisis got underway, but it was not ‘the cause’ of the crisis.” 12. Regulation should therefore not restrict financial innovation but seek to create conditions in the market that promote effective risk management.
European Central Bank: Press Conference - introductory statement  Introductory statement by Mr Willem F Duisenberg, President of the European Central Bank and Mr Christian Noyer, Vice-President of the European Central Bank, at the Press Conference, held in Frankfurt, on 2 November 2000. *  *  *  Ladies and gentlemen, the Vice-President and I are here to report on the outcome of today’s meeting of the Governing Council of the ECB. The Governing Council conducted its regular examination of monetary and economic developments and their implications for the maintenance of price stability in the euro area. It decided to leave the minimum bid rate on the main refinancing operations of the Eurosystem unchanged at 4.75%. The interest rates on the marginal lending facility and the deposit facility were also kept unchanged at 5.75% and 3.75% respectively. Starting with the first pillar of the monetary policy strategy of the ECB, the three-month average of annual M3 growth stood at 5.4% in the period from June to September 2000, unchanged from the three-month period ending in August 2000. While remaining above the reference value of 4½%, M3 growth, reflecting the increases in ECB interest rates since November 1999, has shown signs of moderation over recent months. A further factor to be taken into account is the fact that the growth rate of credit to the private sector increased to 10.8% in September. However, this was influenced by the financing of payments for UMTS licences.