Thanks to financial engineering and innovative products, only a small portion of financial institutions’ assets is in government securities. Therefore, asking for government securities as collateral in open market operations would no longer provide enough liquidity to the financial system. In the meantime, as banks have lost their dominance in the financial system, corporations and non-bank financial institutions have joined the conventional banks as the counter parties of central banks in market transactions. The question in this context is (1) whether the innovative policies we have seen in the last year will lead to longer-term changes in central banking doctrine and behavior, (2) whether in parallel to new developments in financial structure central banks will adopt a more flexible approach in operational practices, and (3) maybe more importantly whether central banks will maintain their influence in the financial markets, which has grown rapidly due to extraordinary actions during current crisis? These are important questions to discuss and I hope this conference would provide new insights to policy makers as we sail through uncharted waters. While concluding my remarks, I would like to extend my thanks to the members of the Forum Istanbul, who have contributed to the constitution of constructive criticism environment that I perceive as an important element in building the future of Turkey. Thank you for your attention. 4  BIS Review 73/2010
For the first time, these exercises will be conducted in a fully integrated way – under the aegis of the SSM – with full accountability of the results. Completion should mark a turning point where there will be no more doubts about the sustainability of our banks and credit should resume at a normal pace. 3. In the longer run, a major policy challenge for the euro area is to “reinvent” a new and robust financial integration model. We need sound cross-border capital flows,  BIS central bankers’ speeches  1  because we do not want the Eurosystem to intermediate permanently between borrowers and lenders from different countries. Developing a safe securitisation process should be a priority, despite the major technical difficulties. II/ – Is Europe facing the prospect of a lost decade? Questions about long-term growth are not limited to Europe. What we hear about our continent reflects a more general concern: the possibility of “secular stagnation” in advanced economies. Larry has launched this crucial debate. I don’t know whether he was thinking specifically about Europe, but, of course, this question is very relevant for us. Secular stagnation rests on the assumption that the natural interest rate is negative. This may happen for two reasons: •  In the short run, we may have a downward shock on demand and an increase in savings resulting from the deleveraging process. I have just explained how we are currently addressing this issue.