Conclusions  After I prepared this presentation, I started even more to support the old truth in slightly modified wording – maintaining financial stability is more the art than the science. Maintaining the financial stability is the mission impossible for one institution to carry out in isolation, be it the central bank or any other authority. What is needed is shared data, shared analysis that brings together macro and micro prudential aspects of financial stability, common set of principles to fall back in case of systemic crisis, and perhaps most essentially, there is a need for common mindset. 4  BIS Review 63/2001  I would like to highlight one essential aspect of financial stability. The pan-European consolidation of banking industry has resulted in rapid increase of cross-border ownership. The question of co-operation between central banks and supervisors is the key to maintain sound financial systems. That applies both to crisis prevention as well as to crisis resolution. How to pass on early warning signals, how to provide emergency liquidity support, how to restructure or wind up big financial conglomerates – these questions are highly relevant for us as well as for the whole common market. I believe this a good time to stop and pass the word over to our moderator who will elaborate more thoroughly on the other mission impossible: how to find a right institutional structure for financial sector supervision. Thank you for your attention. BIS Review 63/2001  5
The challenge, now, is to calibrate and phase in the new framework in a way that does not impede the recovery. The macroeconomic assessment of the reforms underway will help us strike the optimal balance. 25. Beyond capital and liquidity, other important initiatives are aiming at addressing systemically important financial institutions and cross-border resolutions. To better deal with the problem associated with systemic firms, progress is being made to improve the capacity to resolve them orderly, and to strengthen ex ante preparedness, contingency planning, cooperation and information exchange among the relevant authorities. 4  BIS Review 113/2010  26. There is a broad agreement for an approach that may have two pillars. One is about tools and measures to limit the risk of their failure; the other is about tools and measures to limit the consequences of their failures. Discretion is required to allow national authorities to strike the balance between the two pillars and tailor regulatory and supervisory actions to domestic conditions. The challenge is to ensure that national policies to address the risks associated with these firms are consistent, mutually supportive and thus avoiding regulatory arbitrage. But beyond international initiatives, enhancing supervision at the domestic level remains very critical. 27. Higher and better capital and liquidity standards are not sufficient conditions to secure the stability of the financial sector. Changes in the practice of micro-prudential oversight are also needed. Indeed, a lesson from the crisis is that the way supervision was performed prior to the crisis has likely contributed to it.