In addition to issues about banks themselves, I will talk about the underlying preconditions for banking; the legislative and regulatory framework; the supervisory agency and its work; and also the need to supplement the banking system by other financial institutions and markets. There is no single blueprint for banking reform, and my observations come from experiences in many countries, including my own. In my previous work as an IMF director but also as a civil servant in Sweden, I have seen numerous examples of shortcomings in the preconditions for banking, in the regulation and supervision of banking and in the conduct of banking activities. As a minimum, these shortcomings have led to inefficiencies in providing financial services to society. They have also led to higher costs and in many cases to bank problems and even systemic crises. My obvious conclusion is that banking reforms which deal with the flaws are worthwhile for all parties and countries. The cause for banking reforms is strengthened by current developments in banking, which includes a spread of cross-border institutions and activities but also new instruments and methods to handle risks in banking. Such developments generally increase efficiency and stability in banking, but need to be carefully regulated and supervised because they also contain inherent vulnerabilities and risks. Banks As I said at the outset – I do not believe that the authorities can create an efficient banking system “by decree”.
The regulation should allow for a wide range of banks and other financial institutions conducting their activities on a level playing field. The degree of regulation and supervision should be commensurate to the size, nature and complexity of their activities. I wish you luck in your endeavours to reform your banking and financial services industry. As you know, you may call on the IMF to assist you with advice or TA for capacity building or for other purposes. BIS Review 104/2006  7