That policing can be achieved through penal interest rates. But we can see no monetary policy issue in relation to intra-day credit. The extension of sterling intra-day liquidity in our present domestic RTGS system is of no interest to, and never considered in the context of, monetary policy decisions. The same holds for all other countries. Indeed we could go further and say that denying even-handed access to TARGET through out central banks will negate one of the main purposes of the whole exercise, to reduce the risk inherent in systems in which banks are exposed to each other for a period of hours. Banks would find other ways round the restriction which would be more risky. So central banks across Europe will have scored an own goal. We shall need to look carefully at this issue as we move towards 1999. If restrictions were to be applied to out central banks which made TARGET unattractive to banks in London, thereby encouraging them to use less secure cross-border mechanisms for euro payments, then we shall need to think about the other options we could adopt. One possible option might be to develop our own euro RTGS arrangements to allow quick, efficient and safe euro payments within the UK which would not rely on access to intra-day credit from the euro area. We would prefer a pan-European solution which, we strongly believe, would be in the interests of the EU as a whole in the long run. But one thing is clear.
Safe, efficient and competitive payment and settlement systems must be available in our own marketplace, and they will be. London has huge advantages as a strong and competitive financial centre in or out BIS Review 1/1997  -6-  of EMU. We are confident that those advantages will remain. The fact that more and more banks are centring their foreign exchange, corporate finance and investment business in London suggests that they share our confidence in the future of London. In these matters it always seems to me to be best to take one’s cue from ‘revealed preferences’ - where financial institutions choose to base themselves, taking account of all the uncertainties. Those revealed preferences remain strongly in London’s favour. The preparations for EMU are now hotting up. All over Europe, Boy Scouts are packing their rucksacks with the kit they will need for this determined assault on what, in deference to its German roots, we should perhaps call the Magic Mountain, with apologies to Thomas Mann. The Magic Mountain is perhaps a more tactful title to choose than The Confessions of Felix Krull, Confidence Man, or Death in Venice, as some others in London might suggest. I hope that this morning I have given you some insights into what we think should be in the central banker’s rucksack, and how the United Kingdom will assess its own preparedness next year, when the time comes. BIS Review 1/1997