The new techniques employed could lead to a lower cost of capital. In addition the market and its capabilities began to highlight the ineffectiveness of national barriers, and restrictive practices. It gave governments the courage to dismantle restrictions and barriers despite protest from those who, in a series of big bangs, lost their franchises. The examples of the international Swiss Franc - and Sterling - debt markets highlight this. In each case the authorities  2  Glenn Hoggarth and Victoria Sapporta “Costs of Banking System Instability: Some Empirical Evidence”. Bank of England Financial Stability Review (June, 2001). 2  BIS Review 5/2004  in the 1970’s imposed flow controls on new bond issues through queues. But this could be bypassed. As derivatives and swaps developed, so Swiss Franc liabilities could be created by borrowing $ on an unrestricted basis and swapping them outside the jurisdiction of the Swiss authorities into Swiss Francs. So this caused a gradual rethink, as the national grip of the authorities had ceased to be effective. 6. Consequences of technological advance  While liberalisation was an important trigger, technological advance also played a vital role. We may not understand its full impact yet: just as it took us time to exploit fully the benefits of the printing press, electricity, and the motor car. But the advance and speed of communication with its erosion of geographical and national barriers spawned the development of often derivatised financial instruments and risk transfer techniques. The concepts involved in this risk transfer may not be new.
But in general, transparency of process can contribute to confidence. Some indeed argue that you should improve transparency generally to a point where lender of last resort support could be withdrawn altogether. And let the market take the fallout from, and absorb, the shocks as they arise. This I fear gets into the realms of philosophy and political thought, and as a mere central banker I would prefer to go no further! Some countries are less inclined to such opacity. To quote Governor Heikensten of the Riksbank “Those who have lived through a crisis are generally in favour of a transparent process”5  14. Conclusion  I have ranged widely on the many factors which - at least in my view - arerelevant to financial stability oversight. So in concluding, let me try to draw together some of the principal themes in what I have been saying. I am naturally well aware that there are many positive features to today’s environment. But central bankers are sometimes accused of being pessimists and seeing the glass half empty. In our defence I suppose it is our job to think out what could go wrong and to be ready accordingly. The first message to leave you with is that we are concerned about financial stability because of the potential economic and social costs arising from financial instability. Private markets will not always reflect these costs fully and prima facie there is a need for public oversight. Second, the degree of complexity and interconnectedness has increased dramatically in recent years.