And at the very heart of that is their capacity to bring together financial resources not currently needed by their owners for expenditure on consumption or physical investment, and to channel those resources to wherever they can be most productively used – always allowing for risk. The free movement of capital, like free trade in goods and services, is an immensely powerful means of promoting efficient resource allocation nationally, regionally and globally, and as such it can make a major contribution to improving economic welfare – reducing poverty and raising living standards – which is, of course, what we all want to see. Certainly the free movement of capital, like free trade, needs to be governed by rules designed to minimise distortions and unfairness, and to reduce the risks of intermediaries being unable to honour their commitments or of broader, systemic, instability. I don't pretend for a moment that it works perfectly in practice: we could all well do without the wellpublicised institutional failures of recent years, for example, or the volatility which characterised the Asian financial crisis or the more recent "tech stock" bubble. But it is certainly the most effective means of financial resource allocation that we have so far discovered. The challenge is to make it work more effectively – more efficiently, both in terms of intermediation costs, and crucially in terms of the direction of the flow of resources – but also more reliably and securely for both savers and borrowers. This is largely down to financial markets themselves.
The Rt Hon Sir Edward George: The convergence of financial systems Speech by The Rt Hon Sir Edward George, Governor of the Bank of England, at the Oesterreichische Nationalbank Economics Conference held in Vienna, 31 May 2001. *  *  *  The theme of this session is convergence of financial systems, within the context of the overall conference theme of "The single financial market – two years into EMU". What I propose to do this morning is to ask, first, what are we – or should we be – looking for from our financial systems; then to ask, secondly, what are the major driving forces that have been, and are, affecting our financial systems – including but not confined to EMU; and, finally, to offer some thoughts on how those systems might continue to evolve. So let me begin by asking what should we look for in our financial systems. In answering that question I suppose I could give you a long list of particular payments and savings services as well as credit, investment and insurance services, provided to individuals, to private organisations and businesses of all kinds, and to various levels of government. But that would be simply a description of our financial systems which do still differ in many respects as a result of history and tradition, of particular local needs, and of the state of evolution in individual countries. We are more interested in the essential purpose of our financial systems.