Third of all, we had to continue fulfilling the traditional central bank’s functions – ensuring currency circulation, maintaining payment systems, contributing to ensuring financial stability, collecting statistical data and analysing the Estonian economy and financial system. 2. For a small nation, the transition to the euro can be considered high recognition. However, it was also a challenge. The smooth changeover required the joint effort of the entire nation. Residents and retail traders, entrepreneurs and banks – we all managed very well. [EURO AREA ECONOMY AND MONETARY POLICY IN 2011] 1. Monetary policy-making proved quite a challenge in the euro area in 2011. The second half of the year bore no resemblance to the first. The beginning of the year witnessed a continued, albeit slower, economic recovery, both on the global scale and in the euro area. Liquidity was plentiful and oil and other commodity prices soared, exerting price pressures in the euro area. To maintain price stability, the Governing Council of the European Central Bank decided to raise the monetary policy rates. This was done in April and in July. 2. The tide turned in the second half of the year, when waning confidence and growing uncertainties in the financial markets started curbing global growth. This was brought about by market participants’ concerns about the public finances development in several euro area countries. Changes in the economic environment were accompanied by a sharp decline in consumer and corporate confidence in August.
The same systems that allow international trades to be conducted from a hub are also conduits by which volatility is transmitted globally. For the risk to be satisfactorily managed, collaboration is necessary. Regulatory collaboration can take many forms. It begins from interaction on occasions such as this, which represents an opportunity to compare notes, discuss issues and exchange views. Such informal but regular contact should not be discounted. Indeed, I understand from my colleagues that a series of telephone conversations and e-mails with regulatory counterparts elsewhere in the aftermath of Sep 11 contributed considerably to a quick appreciation of the type, and magnitude, of issues that could be expected. This contributed to the avoidance of instability in individual markets. Looking back, we can all agree the markets stood up remarkably well. International meetings and joint forums such as IOSCO are a further step towards setting the foundation for more structured lines of communication amongst regulators. Participation in IOSCO taskforces requires resources but helps to develop better appreciation of characteristics unique in other markets, and alternative approaches to addressing regulatory concerns. It is in recognition of this that MAS has devoted resources to active participation in IOSCO’s committees and working groups. We have also found the Memorandum of Understanding (“MOU”) to be a useful instrument for setting out mutually agreed procedures by which regulators may exchange information and provide mutual assistance.