In the last year, we have commented on market participants’ interest rate expectations. The fifth characteristic is that central banks in inflation-targeting countries must be accountable in different ways for the results of their monetary policy. Inflation targeting is transparent. This allows for a regular follow-up and assessment of the interest rate setting. Norges Bank’s Annual Report with a discussion of the conduct of monetary policy is sent to the Ministry of Finance for submission to the King and communication to the Storting. The Government’s  5  See Svensson, Lars E.O. (1999), “Price Level Targeting vs Inflation Targeting: A Free Lunch?” Journal of Money, Credit and Banking, Vol. 31, pp. 277-295, and Vestin,David (203), “Price-level versus Inflation Targeting” forthcoming in Journal of Monetary Economics. 6  See Fracasso, Andrea., Hans Genberg and Charles. Wyplosz (2003), “How do Central Banks Write? An Evaluation of Inflation Reports by Inflation Targeting Central Banks, Geneva Reports on the World Economy, Special Report 2. 4  BIS Review 43/2005  evaluations are presented in the annual Credit Report. As governor of Norges Bank, I appear at an open hearing in the Storting’s Standing Committee on Finance and Economic Affairs as part of the Committee’s deliberations on the Government’s Credit Report. In addition, Norges Bank Watch sends an independent professional evaluation of monetary policy to the Ministry of Finance. In many countries, the central bank governor must appear before parliament and answer questions.
As an example, the HKMA and our peer authorities in the region have adopted fintech sandbox 3/4  BIS central bankers' speeches  regimes, which are effectively testing grounds with a well-defined scope and a clear timeline. The authorities do not generally stipulate an exhaustive list of regulatory requirements in these sandboxes; rather, the products are to be developed flexibly, and requirements would be evaluated during the process. Coordination among regulators has also already begun as the Global Financial Innovation Network (GFIN) is now inviting applications for cross-border testing of financial innovations. That said, while providing a conducive environment to support innovation, central banks and regulators would have to strike a good balance with its other functions in consumer protection and financial stability, especially as the new and innovative services grow in scale or become widely adopted. Cross-border coordination is also required to address potential arbitrage across jurisdictions, given the much wider reach of fintech products and services. Derivatives markets, on the other hand, have a much longer history. The regulatory framework should therefore be informed by history, and lessons from the global financial crisis must not be forgotten. Regulators need to guard against the problems that plagued derivatives markets before the crisis: namely, the overuse of leverage, excessive interconnectedness, and opacity. I don’t need to “preach to the choir” on the tremendous efforts exerted by regulators and market participants internationally to solve these problems.