There is a further consideration that I have raised on previous occasions – one that would enhance the effectiveness of the intermediation role in our financial system, and address some of the funding gaps, resulting possibly in instances of market failures. Malta lacks a 4  BIS central bankers’ speeches  consistent supply of long term finance that would efficiently fund a project addressed to SME funding needs or to finance structural, economic, social and environmental policies in connection with the long term financing of priority projects. If we look at other countries, such as Germany and France, they managed to cater for SMEs as well as for other environmental and infrastructure investment through promotion or development banks. A development bank would contribute to economic growth by funding sectors and projects that are not catered for by commercial banks on their own. The Central Bank looks at such an initiative as a necessary diversification of our financial base. I understand that progress is being made on this initiative and I find this to be a very positive development. The road ahead Against a rapidly changing economic landscape, Malta needs to be attentive to take advantage of its flexibility and adaptability. In the past years, the Maltese economy went through significant structural change. Not only by diversifying into a number of new growth sectors such as aviation services, pharmaceuticals and internet related activity, but also by upgrading its investments in the traditional sectors.
Moreover, we must do so even while there is continued rapid evolution of financial markets, products and strategies and the constant challenge that evolution poses to our existing supervisory policies and techniques. While the challenge of evolutionary financial markets is clear in countries with financial institutions which are actively involved in the international marketplace, it is no less important for emerging market countries, which increasingly feel the influence of international financial competition. Thus, it is appropriate that we are devoting a day to questions of operational risk, an area of rapid evolution in risk management concepts and practice. The most important current operational risk problem, that of preparing for the century date change in the Year 2000, has a prominent place on the program and in our national supervisory agendas. I congratulate our hosts, the Reserve Bank of Australia, working in cooperation with the Australian Prudential Regulatory Authority, for putting together this program and I thank them for hosting the ICBS this year. I would like to focus on the dual role of supervisors in preventing banking problems and in providing the necessary support when there are systemic problems. When the Basle Committee, in concert with banking supervisors from around the globe, developed and in 1997 finalized the Core Principles for Effective Banking Supervision, it was with this dual role of supervisors in mind.