The regulation should allow for a wide range of banks and other financial institutions conducting their activities on a level playing field. The degree of regulation and supervision should be commensurate to the size, nature and complexity of their activities. I wish you luck in your endeavours to reform your banking and financial services industry. As you know, you may call on the IMF to assist you with advice or TA for capacity building or for other purposes. BIS Review 104/2006  7
Likewise, some of our new instruments could be more efficient to address financial stability concerns. For instance, under some dimensions, balancesheet policies differ markedly from interest-rate policies. By providing valuable safe assets to banks – central bank reserves – a high level of central bank reserves can support their smooth functioning. Even more importantly, it can mitigate the risk that banks will try to supply the demand for safe assets by engineering them themselves. Privately issued safe assets are poor substitutes for public safe assets. xiv b/ Keeping the purchase of private assets to a minimum In any case – and this is my second remark – the purchase of private assets by the central bank should be kept to a minimum. Indeed, the asset-side of the balance-sheet – what assets the central bank buys with the reserves it issues – matters a lot. Buying an excessive amount of private assets such as corporate bonds could run the risk of distorting the signal that asset prices convey on the assets’ riskiness. The present compression of risk premia and credit spreads might already increase risks to financial stability. **  Page 9 sur 11 Conclusion I have restricted my remarks on financial stability to the policies that fall, at least in part, within the realm of a central bank. However, as I have emphasized earlier, monetary and prudential policies are not the only policies available.