BIS Review 52/2008  5  Within the next couple of weeks, the banks will report their results for the first quarter of 2008. I have no information on what they will show. I can only say that the strong performance of their core business in the last quarter of 2007 allows one to anticipate a relatively good performance also in the first quarter of this year. In addition, given the composition of their balance sheet, they will all have profited from the depreciation of the Icelandic króna in the first quarter of the year as well as from the increase in the rate of inflation as they hold more price indexed assets on their balance sheet than indexed debt. You are of course familiar with the regulatory and supervisory framework in Iceland. It is based on best international practice and has received high marks from foreign observers. The Supervisory Authority and the Central Bank cooperate closely on their respective roles in the area of financial stability. Developments over the last few months have increased the intensity of the cooperation and monitoring of developments in the institutions’ respective fields of responsibility and experience. This is as it should be and in line what has been done elsewhere. Like many other central banks, the Central Bank of Iceland has somewhat relaxed its rules on eligible collaterals under its regular liquidity facilities. These are broadly based on ECB rules, but ours are probably still somewhat more restrictive than the ECB’s.
Christian Noyer: The role of inflation - indexed bonds in the process of setting monetary policy: a central banker’s perspective Speech by Mr Christian Noyer, Governor of the Bank of France, at the Morgan Stanley seminar on indexed bonds, Paris, 9 June 2004. *  *  *  Ladies and Gentlemen, [Dear Friends], It is a great pleasure for me to address you here in the context of the first “Séminaire de Paris” on inflation-linked securities organised by Morgan Stanley. Today, I will focus more specifically on “The role of inflation - indexed bonds in the process of setting monetary policy” from a central banker’s perspective, based on my own experience as the former Vice-President of the ECB and the current Governor of the Banque de France. Throughout my presentation, I will occasionally refer to the monetary policy strategy framework implemented by the Eurosystem in which asset prices, in particular inflation-indexed government bonds, can play a role in the context of our economic analysis. Having said this, I will neither elaborate further on the ECB’s framework nor comment on the last Governing Council’s monetary policy decision. Price indexation of financial contracts is not a new phenomenon. According to Robert Shiller1, the world’s first known inflation-indexed bonds were issued by the Commonwealth of Massachusetts in 1780 during the Revolutionary War. These bonds, the so-called “depreciation notes”, were issued to US Soldiers as deferred compensation for their services. They were mainly designed to deal with severe wartime inflation.