Legal systems and competitiveness of financial centres  Fundamentally, the legal system should ensure that contract and property rights are sufficiently clear and predictable; if there is a dispute, participants in the contract do not feel  1  I wish to thank L. Stracca, M. Svoboda, S. Kerjean, F. Recine and C. Zilioli for their contribution. 2  Mishkin (2005). 3  Precisely through its negative impact on the quality of institutions and law enforcement. BIS Review 122/2007  1  the need to take legal action unless as a last resort. Moreover, if there is litigation, the court is independent and able to resolve the claim effectively and in a reasonable time. Furthermore, the judgment, once delivered, has to be quickly enforced. To underline the importance of this aspect let me give the example my own country. There is a growing literature suggesting that one of the reasons for the relatively slow pace of financial development in Italy is the slowness of the civil courts, with the result that, for example, mortgage debt is still a fraction of what it is typically in other advanced countries. 4 At this point it should be clear that an efficient legal system is a key ingredient of competitiveness among financial centres. One of the reasons of the traditional lead of US financial markets over Europe (and the rest of the world) is greater standardisation of legal norms and systems, while the European financial system is still characterised by considerable fragmentation of legislation, regulation and enforcement.
8  In two opinions concerning draft laws on securitisation in Luxembourg and France, the ECB indicated that it stressed that, looking beyond the Commission’s Financial Services Action Plan, it saw merit in a strategy of increased harmonisation in the area of securitisation at the EU level (See in this respect ECB Opinion  BIS Review 122/2007  3  In the context of the current financial turbulence, another issue which is often mentioned is the methodologies followed by rating agencies in the field of structured finance and the need to benefit from legal opinions assessing in an appropriate manner the legal risks related to the securitisation deal’s core components and identifying properly the rights of investors. At this point, let me not abuse of your time any longer. I hope that I have effectively conveyed the message that we, as policy-makers, care that the global financial system is put on a solid legal footing. I wish you all the best for this conference in contributing to this endeavour. Thank you for your attention. CON/2004/30 of 14 September 2004 at the request of the French Ministry of Economic Affairs, Finance and Industry on a draft decree concerning fonds communs de créances (securitisation funds) and ECB Opinion CON/2004/3 of 4 February 2004 at the request of the Ministry of Finance of the Grand Duchy of Luxembourg on a draft law on securitisation). 4  BIS Review 122/2007