In all cases, an indispensable ingredient of success has been an honest acknowledgement of the problem accompanied by the genuine desire of all the social partners to work out an effective solution in the national interest. In the current circumstances, sitting on the fence is not a responsible option. Not only does it become an uncomfortable position to maintain, but it also becomes less credible with time. There is indeed the danger that anybody who is not willing to be part of the solution will be perceived to be part of the problem. I, therefore, feel obliged to call on all the social partners to adopt a long-term perspective and sign up to a substantial reform package which would lay the foundations for renewed growth and sustainable development. A thriving economy is the best social policy. BIS Review 67/2004  5
A concrete example of the merits of financial integration is how the arrival of foreign banks resulted in a rapid development of the banking systems in the Eastern and Central European countries. The citizens and corporations of these countries benefitted substantially from early access to advanced financial services. The second solution – to create an international institution with taxation rights or a system of ex ante burden sharing – is simply not realistic for the foreseeable future. 4  BIS Review 118/2009  Consequently, we are stuck with the geographical mismatch and, as a consequence, crossborder banks pose a real challenge to crisis management. To accommodate this mismatch, national authorities must cooperate more effectively. This is the only feasible option. In order to achieve efficient cooperation, it is vital to build trust between authorities, which explains my third ingredient. In the EU, we have the home country principle as a fix for the geographical mismatch. We have also signed a European Memorandum of Understanding (MoU) aimed at improving cross-border cooperation. However, the home country principle does not solve the dilemma of international banks and national authorities. Tension arises because the home country is responsible for the supervision of branches but the host country is responsible for the financial stability of the country. This tension also persists if the foreign bank operates through subsidiaries. Many cross-border banks centralise different parts of management. There are good economic reasons for such centralisation.