As Mervyn King, Governor of the Bank of England, has also observed, the Northern Rock crisis has highlighted the need to reform the system of banking supervision in order to include (i) a special insolvency regime for banks, (ii) a credible deposit insurance scheme with sufficient cover able to refund depositors quickly. These remarks may be useful for reflection at community level.
Another example of the impact of the legislative divergence on financial stability concerns legislation on liquidity risks, which is not harmonised at European level and is applied nonuniformly to cross-border bank groups internally, at the very time when banking activity, in terms of stability and profitability, depends increasingly on the flow of liquid financial instruments between the various countries.