However, they have contributed positively to the restoration of financial stability worldwide, by helping in the restructuring of other banking systems, buying banks or pieces of banks that were experiencing difficulties. They thus contributed to stabilize markets and financial systems in a time of turmoil. Moreover, they have maintained their commitment to households and firms – both large corporate and SMEs – in the emerging markets in which they operate. We have not seen any halt in banking intermediation in those markets or any retrenchment from those markets. And finally, they are still entering new banking markets, both in Europe and in Asia. Resilient global banks do not only benefit the host markets in which they operate, in particular emerging countries. They have also been very beneficial to the home market. Wide-ranging geographical diversification has helped these banks to withstand our real estate crisis much better. They have been able to compensate the difficulties in the local banking market in Spain, resulting from a recession and the ongoing slow recovery, with much more buoyant and dynamic banking business abroad. Until now, the benefits that I have mentioned can be said to apply regardless of the legal structure chosen by the banks for their international expansion. But our large global banks have also adopted a business model which has some specific strengths that I would like to highlight. Namely that their international expansion was based on the subsidiary model, as opposed to the branch model.
In most of our macro models, long-term variables, such as potential growth or the “natural rate of interest” or the non-accelerating inflation rate of unemployment (NAIRU), play a very important role. They determine, for instance, the output gap, domestic inflationary pressures, and as a consequence the structural indicators that are used to assess fiscal policy and the degree of monetary accommodation. These variables are estimated in large advanced economies like the US as if the latter were a closed economy. They are considered as independent variables for the rest of the world. 1  IMF Performance in the Run-Up to the Financial and Economic Crisis: IMF Surveillance in 2004–07, 10 January 2011. See http://www.ieo-imf.org/eval/complete/pdf/01102011/Crisis_Report_English.pdf  BIS central bankers’ speeches  1  To use some model terminology, most of our models are built on the assumption that Ῡ – which represents the long-term growth rate of the economy – is influenced mainly by domestic factors such as productivity and population growth. Similarly, r* – which represents the world interest rate for most small open economies – is assumed to be determined by long-term equilibrium conditions in the US. Given the importance of these variables for our models, a bias in their measurement would have a direct impact on the assessment of economic conditions, on the forecasts and on the policy prescription. It would seriously undermine surveillance.