And they have overcome both technical and juridical barriers so as to operate on a global basis. You cannot label them in the historical categories: - are they banks? Are they securities firms? Are they insurers? Of course you can categorise them by their historical roots. The large so-called broker-dealers such as Morgan Stanley and Goldman Sachs come from the securities side. The big banks - Citigroup and HSBC - come from the banking side. But today they are all involved in convergent thought processes and operations, even if their precise legal structures, and in many cases regulatory arrangements, may differ. They are all involved in considering in real time whether they are comfortable with the  4  BIS Review 5/2004  balance sheet of assets and liabilities that they have. And they all are involved in risk transfer techniques to adjust to a desired proprietary outcome. Their scope is multifunctional and multinational. This enables them to maximise opportunities for return. But it can also create challenges for the markets, and for the authorities. With global firms if there should be a failure, then who will oversee its resolution, and will there be any safety net to counter what could be significant economic and social costs globally? Which set of taxpayers in which countries will be prepared to share the burden to support such LCFIs? This highlights a real tension in the globalised world. The markets have globalised, and so have the firms. But, to a large measure, the oversight apparatus remains nationally based.
Sir Andrew Large: Financial stability oversight - past and present Speech by Sir Andrew Large, Deputy Governor of the Bank of England, at the London School of Economics, London, 22 January 2004. * 1. *  *  Introduction: Globalisation and the Financial World  The financial system has been in the vanguard of globalisation of economic activities. The past 30 years or so have seen a transformation of the financial scene. Just as the financial world has become significantly more complex with an ever more inter-connected global network across firms and countries, so too has the challenge been transformed for those involved in financial stability oversight. That is my theme tonight. Much of what I am about to say may be familiar. But what I have tried to do tonight is to tie these subjects together - to provide a picture of the whole area we grapple with. So I may have exchanged some depth for breadth in the interest of getting home tonight. I would like first to consider what financial stability oversight is and why it is important. Then, what has changed in the financial market place and the challenges that this has brought. And finally the response of the public authorities to these challenges. 2. What is financial stability oversight? Unquestionably financial stability is a critical ingredient in a high performing market economy, although its definition has been an elusive subject of endless fascination to generations of commentators.