It could usefully play a role in following up on the IMF’s financial sector assessment programmes, not perhaps in individual countries, but by drawing general conclusions about the strengths and weaknesses revealed by those assessments in the round, and about the overall effectiveness of national follow-up. There are signs that the Forum’s membership is beginning to favour a more proactive approach, but progress is slow. But that recommendation does rather beg the question of what these weaknesses are, which brings me to my third point. (iii)  Plugging the gaps  I believe we can identify some gaps in our defences against financial instability, which could be plugged, if the will were there. There is not time today for a comprehensive overview, so let me just identify a small number of issues which I believe do need to be resolved. One important lacuna is the absence of a global regulatory regime for reinsurance companies. In some countries, as in the UK, reinsurance firms are directly regulated. In others, they are regulated only indirectly, through insurers. In yet other countries they are not subject to any meaningful regulatory regime at all. It may be argued that we have lived with this uneven coverage for some time. But there is evidence to suggest that reinsurers have been taking on more credit risk than before, often transferred out of the banking system through derivatives such as credit default swaps.
Better monitoring of the vulnerability of domestic economy to shocks is needed. It requires availability of data and proper understanding of (1) vulnerabilities which can be accessed through the sectoral balance sheets and flow of funds data; (2) screening of markets, where the boom-bust cycle might arise from, such as the real estate markets; (3) proper following of the financial and real sector linkages within an economy and (4) better information on public finances. This list of general recommendations in fact hides a necessity for very large and energy consuming efforts in the area of statistics. Although there are many angles which should be noticed, I would stress those which I think can give us “the large picture” of what should be done. The first lesson of the crisis was that timely, more granular and more inclusive data is needed. And let me note here that probably monetary statistics is one of the most explored examples, where the granularity and inclusiveness of data becomes the next inevitable developmental step. The aggregate monetary data should capture all sub-sectors of the financial sector, including insurance companies, pension funds, investment funds, other financial intermediaries and the shadow banking system. Also, for the purpose of tackling the issue of cross-border financial flows, consolidated data for banking or insurance groups seems inevitable. This requires a serious reshaping of the monetary statistics. I think that the Eurosystem offers a good example of concrete steps being undertaken to translate the need for granular and more comprehensive set of data, into a reality.