Transcript

Transcript of a Press Conference on the Spring 2008 Global Financial Stability Report by Jaime Caruana, Director of the IMF's Monetary and Capital Markets Department, with Laura Kodres and Peter Dattels, Division Chiefs in the Monetary and Capital Markets Department

April 9, 2008

MR. MURRAY: Good day. My name is William Murray. I am Chief of Media Relations at the IMF. Welcome to the Spring 2008 Global Financial Stability Report briefing. Joining me today is Jaime Caruana, Counsellor and Director of the Monetary and Capital Markets Department at the IMF. To his right is Laura Kodres, Chief of the Global Financial Stability Division, and to Laura's right is Peter Dattels, who is Chief of the Global Market Monitoring and Analysis Division. Jaime Caruana will have some brief opening remarks and then we will take your questions.

MR. CARUANA: Thank you, Bill. Good morning. Thank you all for attending this release of the spring edition of the Global Financial Stability Report. I would like to focus my remarks on our assessment of the strains that have increased in global financial markets since our last report and to provide also some comments on policies.

Overall, risks to financial stability have increased sharply since the October 2007 Global Financial Stability Report. Despite timely actions by policymakers and significant adjustments by financial institutions that have already occurred, markets remain under considerable strain from a combination of weakened balance sheets, deleveraging, falling asset prices, and a more challenging macro environment. There has been a collective failure to appreciate the extent of leverage in financial markets and the associated risks of disorderly unwinding. Private sector risk management, disclosure, financial sector supervision and regulation all lagged rapid innovation. Transfer of risks off banks' balance sheets was overestimated and has led to enormous pressures as these risks have migrated back onto the balance sheets. Recent actions by the Fed in resolving the Bear Stearns case and providing liquidity to a broad range of counterparties has helped to reduce the possibility of a tail event in the financial system and has stabilized markets. However, funding strains remain high and balance sheet pressures on financial institutions continue. The credit shock emanating from the U.S. subprime crisis is set to broaden amid a significant economic slowdown. The deterioration in credit has moved up and across the credit spectrum to prime residential and commercial mortgage markets and to corporate credit markets. As the credit cycle turns, default rates are likely to rise across the Board. While none of these sectors show the same deterioration in underwriting standards and high risk lending observed in the residential subprime sector, all are unlikely to remain insulated from a cyclical deterioration and tightening credit conditions.

With a weakening economy, write-downs and prospects for further losses are placing additional pressures on banks' balance sheets, which may limit their capacity to lend. This dynamic has the potential to be more severe than in previous credit cycles, given the increased level of securitization and leverage in the financial system. Sizable injections of bank capital from sovereign wealth funds and elsewhere have helped, but more may be needed to restore their lending capacity.

While we have not yet seen a slowing in credit growth in the figures in the statistics, leading indicators point to a tightening of credit conditions across many economic activities while segments of securitization and funding markets remain unimpaired. We have highlighted simulations in our Global Financial Stability Report that suggest a potential large impact on U.S. economic growth of these effects, and Europe, too, may see tightening conditions and a slowing credit growth as their banks have experienced losses and securitization markets are also under strain.

So far emerging markets have been broadly resilient to the turmoil in global markets because of improved policies, stronger balance sheets, as well as stronger macroeconomic conditions. However, global spillovers could test this resilience through three main channels: First, the general repricing of credit risk has also increased the cost of external financing and reduced the availability of funding to emerging markets; second, cross-border interbank funding could recede, owing to pressures on banks in mature markets; and, third, if growth slows in emerging markets, investment flows could retrench, prompting corrections in equity valuations and increased potential for currency volatility.

As we identified in previous GFSRs, signs of strains have emerged, particularly in countries with a combination of high current account deficits and rapid credit growth that is financed largely from international markets and bank borrowings.

The immediate policy challenge for policymakers as well as financial institutions is to contain and mitigate systemic risks and economic spillovers. We have seen confidence quickly evaporate ending in liquidity-driven solvency events that threaten the core financial system, and these priorities, the priorities in terms of policy include continuous efforts to reassure markets with accurate and timely reporting of exposures and valuation methods for structured credit products and other illiquid assets. I would recommend Chapter 2 of the Global Financial Stability Report that looks in great depth at the valuation and disclosure of structured products and calls for better transparency and disclosure, particularly of off balance sheet entities, calls for a differentiated system of ratings and also for some standardization of some of these complex products.

The second is repairing balance sheets, boosting capital and securing funding, which is necessary to reduce deleveraging and to avoid a credit contraction in the broader economy.

The third is that central banks should continue to provide liquidity support to assure a smooth functioning of markets. As we have seen, this will likely require continuous adaptation to the needs of markets, including possibly through joint action. Chapter 3, again, of the Global Financial Stability Report shows how weaknesses in liquidity risk management and market illiquidity contributed to the crisis and were transmitted globally. It also studies the effectiveness of recently used central bank instruments and practices and suggests that coordination and convergence in private and public management of liquidity could increase the system's stability.

Finally, stronger supervisory oversight could also contribute to the rebuilding of confidence. The public sector should proactively stand ready to promptly address the stress and should prepare contingency plans. As you have seen, the second subtitle of today's edition is Restoring Financial Soundness. Medium term reforms are also clearly necessary to reduce the risk of future crisis while preserving a dynamic financial service sector. The IMF is fully engaged in a wider effort by national authorities and international bodies to analyze and learn from the recent turmoil, and perhaps it is important to underline our cooperation with the Financial Stability Forum.

Areas of focus of this medium-term approach include risk management practices, ratings of complex products, valuation and accounting, and disclosure issues, gaps in the regulatory, supervisory, and crisis management frameworks. These are the basic groups.

So let me conclude by saying that also that in these efforts, regulation and supervision cannot substitute for effective risk management by private agents and can, if taken too far, exacerbate moral hazard. The focus therefore should not be on trying to eliminate all the risks but on reinforcing proper incentives and addressing the tendency of financial market participants to underestimate the systemic effects of their collective actions. I would like now to take your questions.

QUESTIONER: It seems like this is one of the most downbeat GFSRs that I have ever read. In previous reports there were talks of the risks of things like pandemic, avian flu, and so on. This has not come up at all here. I wonder whether the financial system is more at risk, more vulnerable to those kind of threats now given the increased vulnerabilities from the credit crisis than it was previously.

If I may, also, I just wanted to ask about the U.K. It just seems you picked the U.K. as a specific example of a vulnerable economy in Europe. I wonder whether you feel there is a risk of it following in the footsteps of the U.S. in terms of its housing market and its wider economy.

MR. CARUANA: Well, I think our analysis has concentrated more on the implications of what is going on in credit markets and financial markets. It is obviously also the case that when the financial systems are more fragile and they are under stress, other shocks can have a higher effect. But we have tried to analyze and concentrate most of our analysis on the situation of financial markets. I think it is more the WEO that has analyzed in detail the situation of other housing markets, but what we would like to say is that of course the implications of housing markets as stated by the WEO in other areas can also have significant implications for the credit quality and the bank balance sheets of other financial institutions and other markets. What we tried to signal is that it is this interaction between weakening economies, asset prices that are moving down, and some pressures on the balance sheets that can create a dynamic that can lead to additional financial instability in financial markets, and that is why we continue to recommend the measures that we have recommended, basically transparency, writing off these losses when they occur and increasing and boosting capital in financial institutions. I think these recommendations, these policies, apply for the U.S., U.K., and other countries.

QUESTIONER:.Do you see a risk of a global recession? You mentioned the need of joint action by central banks. Could you elaborate on that, especially for the Fed and European Central Bank? Thanks.

MR. CARUANA: On recession, I think you will have the opportunity to discuss with the Economic Counsellor these elements in more detail, so I will not enter this area.

Again, I would like to say in this regard that we should not, and I probably will repeat that, we should not underestimate the interaction between financial markets and asset prices, corrections in asset prices, and a weakening economy. So I think this is what we need to have in our mind.

In terms of cooperation, I think the two messages that we are saying is the importance of, first, cooperation, but we go a little bit further and say that perhaps it is also necessary for central banks to have some degree of convergence on the tools that they have been using, and on that we are talking about some kind of, I would call it, natural convergence, meaning that we have to understand that there are differences in financial systems, differences of practices, of history, of regulations that have to be taken into account, but still there is some room for some convergence of some practices, and that probably the messages that come from these actions that the central banks take when they need to inject liquidity and to manage these fragilities on the financial markets would be clearer if there is some obvious convergence among the tools that they are using.

QUESTIONER: The last time that there were big write-downs, I think it was last week or so, there was a feeling in the market that this was good because it was sort of the last batch of the write-downs. Reading your report I had the impression that you do not see it that way, that you expect that there will be more losses. Looking at that calculation that you made of one trillion losses, is that a correct reading of your report? Do you see still more write-downs based on your estimation of one trillion losses in the United States?

MR. CARUANA: What we are basically saying is that there have been write-downs coming out of the subprime crisis, and in addition to these write-downs now the deterioration in the credit markets is moving to other categories of products, to other asset categories, and this is basically because of the downturn of the cycle because of the weakening of the economy. That will bring additional pressures to the balance sheets of the banks, and it is very important that the banks continue to be able to lend, and that is what we want to emphasize. So to some extent, yes, that is the reading. We are seeing additional pressures coming to the balance sheets because of the cycle, and that has to be taken into account, and that is why we continue to recommend increasing in capital because that would facilitate that the lending capacity of the banks continues to operate.

MR. MURRAY: There is a question on the Media Briefing Center. They are looking for clarification on the $945 billion figure. They are asking if that is a forecast of write-downs or actual losses.

MR. CARUANA: It is a kind of projection that includes the write-downs on the subprime, not only on the balance sheet of the banks, it is the total write-downs plus the write-downs that could—some projection of other asset classes in the United States that because of the cycle could experience some losses, so it is a figure that is very different from other figures that we have been using in previous GFSRs, and I think it would be very important to understand the differences. We are not talking about the losses of the subprime. We are talking a much more broader. Perhaps Peter Dattels would want to expand on that.

MR. DATTELS: Sure, just a point. The way we did the analysis is we broke it up in terms of the unsecuritized portion, if you like, the loans held by financial institutions, and the securitized portion, which looked at market pricing. So also, in addition to what Mr. Caruana has said, it embodies market expectations in terms of the pricing of the securities. So basically the estimates are subject to changes in markets, which is the second half of that table.

QUESTIONER: I wonder if I could pick up on your comments about sovereign wealth funds. It seems that one ray of light in this otherwise extremely gloomy report is the role that SWFs have played to sort of create some of market stability. I was wondering, do you fear that there may actually be a threat to this key group coming from a rising trend of protectionism? I was wondering if you could just be a bit stronger about where the IMF stands on that.

Also, could you just give some indication of where you think central banks should converge towards? Sort of towards the Fed or towards the European ECB model? Who has got it right?

MR. CARUANA: Okay, let me start with the last one. We have to recognize that through this period of time, through these months of instability in the interbank market, central banks have done a very good job in terms of providing the liquidity that was necessary. They have been able to adopt substantially what the markets were requiring. I think there are lessons to be learned from that, and I think that is what we are trying to say, that there are lessons and that to the extent that we can converge in some of the practices, it would be much easier for markets to understand what are the intentions and the actual practices and actions that central banks take forward. We think that, for example, there are lessons to be learned about the amount and the collateral that is accepted by central banks, and it seems to me that it has moved to accept a broader range of collateral, and the same happens with the counterparties. It has been a trend to accept more broader number and categories of counterparties. To what extent this will be definitive is something that we have to think, but in any case, it has proved that when interbank markets are not working properly, the need to distribute liquidity widely requires to be able to act with a broader range of counterparties and accepting a broader range of collateral. Also in terms of the term funding, the need also at some point of time to be able to provide not just interday but term funding has also been something that needs to be explored. I think central banks are doing this and learning about this kind of lessons. Our additional message is that it would be good that there is a kind of convergence. I would not say to a best practice, but it would be some kind of convergence to something that has proved to be useful for all of them. So that was the second part.

On sovereign wealth funds, we think that it is very important to keep the financial system open and competitive, and we think that we would like to engage in very close partnership with the sovereign wealth funds in terms of setting some transparency principles and some best practices that could help a lot to mitigate some of the concerns that have been raised around sovereign wealth funds. So I think that sovereign wealth funds can play a very important stabilizing role. A good example is their infusion of capital in some of these institutions, but they are growing in size. They are growing in importance, and therefore some concerns have been raised. I think it is important to be responsive, transparent, and we would like to work with them in order to develop this set of best practices that in our view could help to keep the global financial system open.

QUESTIONER: I wanted to go over that $945 billion again. Over what time period are we talking about and how much of that $945 billion has been realized? Separately, you also compared it on another chart to the losses of the Japanese. Japan was in a 10-year recession or stagnation, but you do not see anything like that in the U.S., so can you explain that? Lastly, just one other thing on some of the data. On the emerging markets, you had a nice chart with shading of four different areas. So if a country is bad in all of those, is in the shaded area in all four categories, what is the lesson there? What is the message? How would you characterize those countries?

MR. CARUANA: I will ask Peter Dattels to answer these questions, but let me say one thing. I think it is very important not to concentrate on the figure. This is just a calculation to illustrate an idea. What I think is important is the concept, not just the figure. These kind of calculations are not very accurate, and we do not have privileged information to do these calculations, so this is market information that is already in the market. What we tried to calculate there is to what extent the cycle can bring additional pressure to the pressure that already exists coming from a very specific shock that was the subprime shock, and the answer could not be much more than precise that this will bring relevant pressure. So that is what we want to say. I know that figures are very appealing, but I would ask you not to concentrate that much in the number but more on the concept. With that, I will ask Peter to say a few words.

MR. DATTELS: When these estimates were struck, it was March, and this probably was at the worst point of the crisis in terms of the pricing of securities. Since then spreads have come in substantially. In terms of the evolution of this crisis, securities pricing may be picking the worst point, and clearly that is why markets were responding to the extent that they have. And of course the lion’s share of these losses we show are in securities, and mark?to?market pricing of potential write?downs on those securities.

As for loans, that is a bit more forward looking. We are looking at this in terms of the cyclical losses over and above what banks might normally write down in the context of a weaker economy. Obviously, that raises some questions about the outlook that markets are looking at as well.

For what has actually been recognized, the focus has been on the subprime losses; I think in total it is now over $200 billion that the banks have reported, and we do believe that we are coming towards the end of the reporting of those losses. According to our estimates, you might see another $80 billion. We do point out that that is the focus on the banks. As you will see from the table, there are wider holdings of these securities amongst financial institutions, and you would expect over time that some reporting of that would come forth, so I hope that answers the question there.

As to forward looking potential writedowns, this would take place over two years, so it would be wrong to take this one trillion and then say, oh, how much of that share has been reported? As Jaime has said, you need to look at this a little bit more holistically. You can look at the subprime and what we have seen, and you can look at mark to market losses on securities, but the latter is going to change almost on a daily or weekly basis. In terms of the underlying scenario, we have a time span of two years, so we are looking at this through the economic cycle. So these are potential forward?looking losses. That is why the message is about the need for strengthening balance sheets to ensure that banks are capable to lend and to avoid a credit crunch.

MR. CARUANA: There was another question on the macro-financial indicators in selected market economies. I think that was what you were referring to. What we are basically saying is, first, that emerging markets have done very well in this crisis. They were not at the epicenter of this crisis, but at the same time, and this is something that we have continuously been repeating, there are pockets of vulnerabilities, and we have selected here some indicators. Obviously the message is that policies should be trying to address those vulnerabilities that exist in these countries, these indicators, but again so far emerging markets have been able to cope reasonably well with the pressures that are coming from the crisis, but the principle is that nobody is immune, and they will be tested and continue to be tested by the spillovers of this crisis.

QUESTIONER:You will forgive me for the first question back on the $945 billion. I know you are trying to take attention away from that number. I think it is important that we understand it. If this is largely a market-derived estimate based on prevailing securities prices, what does your fundamental analysis tell you about these prices? In other words, do you believe that the market estimates are probably, to the best of your knowledge, about in the ballpark or do the market prices certainly of mid-March, as some analysts believe, exaggerate the likely ultimate extent of losses on these portfolios of loans?

Secondly, if I may, can you give us some sense of the geographic dispersion of these losses?

MR. CARUANA: I will ask Peter Dattels to answer this.

MR. DATTELS: Sure. In terms of the securities pricing, we do have analysis in the report, and we do feel it is more the latter than the former in the sense that in some cases the pricing that we see in derivative markets reflect a very extreme scenario for the path of delinquencies, and that reflects the kinds of downward asset price spirals that we have been seeing on the securities under the kind of deleveraging scenario that we have seen that has put pressure on valuations, particularly as you are moving across different asset classes, and indeed some of that has come back in recent days.

QUESTIONER: Are you saying it is the IMF's belief that the total losses will be less than $945 billion because market prices have overshot? Or are you saying it is the IMF's belief based on the available information that the total losses will be in the ballpark of $945 billion?

MR. DATTELS: In some sense we are reflecting the market's expectation because we are trying to channel this through to how this impacts financial stability. This is, if you like, not our forecast of losses, just the implication of market developments for financial stability.

It is very difficult to ascertain the geographic distribution. We have reflected that distribution in relation to subprime losses, and we have made the point about the exposure of European banks to disproportionately or proportionately more of the structured variety, and that is reflected into some of the charts and analysis that we have there. These are U.S.-origin debt and instruments, so on the broader category it would make sense for that to be proportionately more borne by U.S. institutions.

QUESTIONER: Last October I asked you about the health of the patient, and my question was if he was out of the intensive care room or not. I think the patient is worse now. Do you think—let's put it in soccer terms, I know you know about it. We saw a first defensive line, let's say liquidity through the central banks. Then the second defensive line with the sovereign wealth funds. Do you think we need something else, some new treatment, some new strategy like public funds in the market in order to maintain the stability or soundness of the system?

MR. CARUANA: What we have seen is the patient leaving and coming in again to intensive care, and if you take some of the typical spreads measures, you can see this kind of thing, which underlines again that this is not just a typical, I would say, excesses in markets that need a correction, but at the same time of the excesses and the necessary corrections of markets there were some fault lines in the financial system that needed to be repaired. So it was a little bit more than that. So I think it is important, as we described at the beginning, the issue was that the innovation has been so rapid that not even financial markets have been able to keep up with all this rapid progress, and some of the oversight, some of the elements that should have mitigated some of the stability problems have not been able to keep up with that very rapid progress, the oversight, all these elements. So it may be necessary at some point of time to think that the use of a public balance sheet is necessary to help in this kind of market situation. I would even say that to some extent this has already started to happen. Now, we have to be careful in that, and the question is to what extent the situation continues to deteriorate. That would determine to what extent this is something that is necessary, and then we will be able to answer to what extent the need is becoming more and more evident. But I think that we should be open to think that this interaction that I have explained before can have damaging effects and that in some cases this may be necessary.

QUESTIONER: Mexico, like other countries in Latin America or even in Eastern Europe, has an open financial system, and now the problem is in the mothers of the affiliates, and the central bank in Mexico and other countries have reported that these big institutions, like CDOH, HSBC, or maybe Spanish banks, have drained liquidity from affiliates, and even there is a possibility to have a hostile takeover from outside. How do you see this? And the rush of regulation because they are just now trying to impose new liquidity measures in our systems.

MR. CARUANA: I am not sure I am completely familiar with the new measures that are coming there. I think that so far as I have been saying, and I think Mexico is not an exception, the main liquidity problems are happening in the more mature markets, and the reflection of that can go to emerging markets through different channels. One of the channels is that the parent companies may be more in need of liquidity, and that may affect the subsidiary, but I do not think that in the Mexican case we are in a situation that is a difficult one at all. I do not know if that answered the question. Pete?

MR. DATTELS: I think it is worthwhile to distinguish between the repricing of credit and some constriction in flows available through international bond markets versus the parent/subsidiary type relationships. Our discussions with parent banks that have sizable operations in Latin America and in Emerging Europe suggest that they are very much in this for the long haul. They see the underlying strength of the economies, and there is no intention of paring back. We are raising this more as a risk if the crisis were to deepen going forward, and just recognizing these channels and linkages.

MR. CARUANA: In any case, this question allows me to perhaps emphasize another element of policy which would be the coordination among supervisors cross border, which I think is very relevant for these kind of situations.

QUESTIONER: I was struck by the contrast between this Global Financial Stability Report and the last one. I remember in last April's report you estimated that the subprime crisis was unlikely to pose a systemic risk or cause big losses for investment banks. I suppose that a sort of trillion dollar change in forecast in one year is quite significant. What have you learned over the past year that changed your view of the financial system and what are you doing to make sure that this kind of sanguine approach does not lead to other forecasts that might be slightly misleading?

MR. CARUANA: I think everybody has learned a lot, and at the beginning we thought that the subprime could be an important element, but at the beginning it was more of a contained problem in the United States. I think the situation is a little bit worse, and we said that at the beginning of this Global Financial Stability Report, that there was a kind of collective failure in understanding what was the leverage that this financial system had been accumulating for a long period of time, and the leverage came in many ways. The direct leverage, the credit growth, and this kind of thing, but it comes also in the off-balance sheet instruments that were used, that were very highly leveraged. It comes in the new instruments that contain additional leverage. In many ways the financial system was increasing the leverage overall. I think there was a collective failure in understanding what were the implications in the deleveraging process. The deleveraging process has been much more powerful, the channels of transmission of all these elements have been much more powerful than it was expected. I would say when we wrote the March last year GFSR, I think it started to become more evident when we saw how market illiquidity in some of these instruments moved extremely rapidly to the core of the financial system, which is the interbank market, and we have devoted one chapter to analyze these kind of things. That happened really during the month of August. At that point of time I think we all started to realize that the implications of underestimating risks and underestimating leverage could have really important implications, and again I think we have all to be a little bit humble on the analysis of the crisis because it has been a very, very complex crisis.

MS. KODRES: Could I have just one additional comment. Not only is the leverage surprising in the transmission from the market liquidity and the funding liquidity an important aspect of it, but I think it is worth remembering that the deterioration in the underlying fundamentals was larger than most people anticipated. When we looked at the subprime market, we have a couple of figures in the report that track the delinquencies, and at the time people did not expect delinquencies to rise as significantly. It is also relevant to consider the fact that underwriting standards had deteriorated. So there are parts of this that emanated from the subprime to other areas because the credit quality had deteriorated along a number of dimensions. That is why we are seeing this spread to Alt-A, to some prime mortgages, to some other areas including leveraged loans, because the underwriting standards had also deteriorated. So we see a combination of larger changes in fundamentals, accompanied by the higher leverage and the knock-on effects of how exactly the financing was undertaken, and it is a combination of those two things that have really made the crisis much worse than we had anticipated.

QUESTIONER: In the report you talk about governments preparing contingency plans to intervene in banks and to deal with large sums of impaired assets. So my question is, should contingency plans include things like nationalization or buying directly those impaired assets? Thank you.

MR. CARUANA: Contingency plans need to be tailored to the specific cases, so I would not go as far as you are asking. Our approach here basically is saying, listen, you have to be ready, and in some cases you may have to go as far as that or not, and it depends on specific cases, but the situation requires that you really think about all these issues and get ready for early intervention, for early remedial action, and that is what we are calling for.

QUESTIONER: What does the sentence or expression to deal with impaired, large sums of impaired assets mean because what the government should do...

MR. CARUANA: It depends on the situation, but it is not the first time that governments have faced a large stock of impaired assets that needed to be addressed by one company buying these assets or these kind of workout schemes that have been used in other previous crises, so I think there are good experiences and reasonable experiences in other situations that can be thought about and learned about from them just in case that at some point of time is necessary.

QUESTIONER: You say I think it is in the summary that central banks should reflect on what contribution monetary policy might have made to the situation we are now in. I wonder if you would like to reflect yourselves on what contribution you think monetary policy might have made into inflating the credit bubble.

MR. CARUANA: Well, first of all, I would say that certainly one of the elements that has contributed to some assets being overvalued has been a long period of time of low interest rates and future optimistic expectations about the prices of some of the assets. That does not mean exactly the same as saying that the monetary policy was not appropriate. I think one of the most difficult chapters in monetary policy is how this monetary policy has to address asset prices. I think this requires a little bit of thinking. There are several schools of thought. On the one hand, you will find those that think that really it is very difficult to forecast where you are facing, when you are facing an overvaluation of assets, that this is not an obvious element, that you can get really wrong or even that if you tried to combat that with monetary policy, the measures that you need to take would be extremely drastic for the economy. And therefore that monetary policy should concentrate on what they know better, that is price, and not to look that much to asset prices.

There will be another school of thought that would say that despite all these difficulties, there is so much information in asset prices, and at the same time the influence of asset prices on the economy is so relevant that you need to pay attention to these elements when you decide monetary policy, and you may find situations when you need to react to these changes in prices because they are telling you something about the future difficulties that could come to the economy. I think this is a debate that is very important, and if you read the chapter that the WEO has prepared for the housing market, I think we are more in the camp on those that think that you need to be looking at these other prices. And if you look at these other asset prices, not targeting them as an objective of monetary policy, but looking at them probably you get a better macroeconomic performance. So in any case, this is a very interesting debate that probably should continue. Still, we are in the midst of the crisis. It has not finished. We have still lessons to draw from the whole exercise.

MR. MURRAY: I would like to thank you all for joining us today.