Since the inception of the euro, it has staged an impressive take-off, even though its institutional, legal and accounting environment is still far from optimal. Central bankers have good reason to welcome such developments. Not only because they probably make the saving-investment process more efficient, but also because they allow for a better distribution of credit and market risk which should - if anything - enhance the stability and robustness of financial systems. BIS Review 37/2002  3  Financial processes and markets will continue to become more and more internationalised with obvious impacts on securities operations, liquidity and collateral management procedures. What kinds of challenges will this create for market infrastructures on the one hand, and for oversight authorities on the other hand? Let me address these two questions in the following. Implications for financial market infrastructures A first requirement for financial market infrastructures is that they must be capable of coping not only with an increase in cross-border securities operations, but also with their time-critical nature. Therefore, particular efforts should be made to ensure intraday finality, to shorten settlement cycles, to co-ordinate operating hours among the individual systems and to standardize communication procedures as well as message formats. As you know better than I, this is easier said than done, since we still rely heavily on technologies and systems that are tailored to domestic needs and peculiarities. The current coexistence of several non-interoperable platforms implies an extensive amount of costly manual intervention.
All in all, the introduction of the euro has been a very positive development for the international monetary system in general, and for Switzerland in particular. We benefit from the greater transparency offered by the euro and the lower transaction costs made possible by its creation. Perhaps for the first time in history, we are surrounded by an area that shares the same monetary policy objectives as we do, namely price stability. This explains to a large extent why the Swiss franc/euro exchange rate has been relatively stable over the past five years. But the presence of a single European currency has per se also shielded third currencies - like the Swiss franc - from too much volatility in the case of dollar turbulence. At the same time, we keep the trump card of an independent monetary policy that enables us to respond very rapidly to the specific needs of the Swiss economy. Between 2001 and 2003, we have thus lowered interest rates more quickly and more decisively than the ECB. Once economic activity showed signs of recovery, we were able to gradually shift to a less expansionary stance, again well  4  BIS Review 72/2004  before any similar move by the ECB. With inflation around the one percent mark, we enjoy price stability and our interest rates lie clearly below corresponding rates in the eurozone. Thanks to enhanced stability in Europe with the introduction of the euro, a two headed international monetary system is good news for small countries.