None are perfect but all are independent of the internal model, and therefore can help provide us with a different view on the evolution of risk exposures and a safeguard against model drift. All risk measures have their limitations. So we plan to use a range of measures alongside other supervisory review process initiatives, such as the analysis of internal model outputs. Conclusion In conclusion, given today’s audience, I want to stress the critical professional role of actuaries in current soft market conditions, where there may be a greater tension between on the one hand underwriting discipline and appropriate reserving and on the other hand business growth and current-year profits. Actuaries are responsible for providing assurance on reserves and opinions on both the underwriting and reinsurance strategies of firms, implying strong engagement with the risk function, as well as independence and objectivity in their assessments. Events like today’s, where actuaries come together to share knowledge, with the aim of raising professional standards, are particularly important and welcome. Chart 1  4  BIS central bankers’ speeches  Chart 2  BIS central bankers’ speeches  5
A problem, of course, was the persistent weakness of the Euro in foreign exchange markets, despite strong "fundamentals" in terms of conventional analysis. This was largely the result of an outflow of capital, much of it drawn into the US by the magnetic attraction of prospective corporate earnings growth – and apparently continuing despite the US slowdown. The euro's weakness gave rise to widespread – but in my view unjustified – criticism of the ECB. The task of a central bank operating an independent monetary policy is necessarily a limited task, not least because it effectively has only one instrument – its control over short-term interest rates. Its role – as I said earlier – is essentially, to use that instrument to influence aggregate demand in the economy, with the aim of keeping demand broadly in line with the supply-side capacity of the economy. The measure of its success is consistently low inflation. Against that criterion the ECB has been relatively successful. The Euro area economy has grown, above trend, with core inflation nevertheless remaining within the tolerance range of 0-2%, even though on the headline measure, influenced by rising oil prices and the weaker exchange rate, inflation has for the time being moved above the top of that range. The ECB would have put that internal stability of the Euro area as a whole at risk if it had attempted at the same time to use monetary policy to target the euro's exchange rate.