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Across the world's major economies, addressing the failures of banking ranks among the highest policy priorities. In the harsh glare of the current financial turmoil, it is clear that many banks outside of Canada were either not doing their jobs or were doing them in ways that created enormous risks.

Let me state at the outset that the speed and synchronized nature of the recent global downturn has resulted in a heightened degree of uncertainty, which is evident in the diverse views on the outlook.

These are challenging times, indeed. We are facing a financial crisis without comparison for generations. Most financial markets have experienced historic declines in prices and unprecedented spikes in volatility.

The outlook for the global economy has deteriorated since the October Monetary Policy Report, with the intensifying financial crisis spilling over into real economic activity.

It has been a difficult year for capital markets professionals. The turmoil has deteriorated into a full-blown financial crisis. Most financial markets have experienced historic falls in prices, and some are strained to the point of closing.

Throughout the years, Canada has been a major beneficiary of London's innovation. Companies of adventurers, conceived and funded in London, opened up large swathes of Canada to international trade.

In Canada, our financial system is sound, and our financial institutions are already well capitalized. We are nonetheless affected by global developments. That is why the Bank of Canada has taken extraordinary measures to provide liquidity.

The events of the past few weeks in global financial markets have been dramatic. Money and credit markets seized up. There was a massive flight to the safety of the highest quality of government debt.

In the Update, the Bank described three major developments affecting the Canadian economy: protracted weakness in the U.S. economy, ongoing turbulence in global financial markets, and sharp increases in certain commodity prices, particularly energy.

There are two broad classes of arguments for greater flexibility in the design and application of monetary policy frameworks. The BIS has done a great deal of useful work on asset-price targeting in particular and on the complicated interplay between monetary policy and financial stability in general.