There is little reason to suppose that the authorities are likely to be any better than the private sector at finding the way forward. Nor is it obvious that national authorities have the locus or leverage to insist on a particular model. Much the same reservations would apply to any European level intervention. That said, what the public sector can contribute, in this area as in financial markets more generally, is a removal of barriers to competition, requirements on the provision of information and the easing of constraints on the effective functioning of the market. If consolidation does indeed take place, the public authorities may also have a role in ensuring that heavily concentrated market infrastructure providers do not exploit their position. But at a European level we are at present still some way from this situation. And internationally we need to work together, within the WTO and the IMF, as well as within the various international regulatory and professional bodies, to promote the global free movement of  BIS Review 48/2001  3  capital, because in this context – as in the case of free trade – the potential benefits are not confined to national or even regional boundaries but increase within wider international participation. Mr Chairman, we have come a long way in improving the effectiveness of our financial systems, and there are powerful forces at work pushing us in the right direction – including, within Europe, the introduction of the euro. But we still have a very long way to go.
The asset management industry is indeed a sector where there is robust activity that should not be destabilised. Moreover, the reintermediation of the deposits of institutional clients and companies cannot be justified on the basis of regulatory ratios (in view of the strict treatment of these deposits in the draft  BIS central bankers’ speeches  3  regulations/reforms). Furthermore, the broadening of the deposit base of banks should not happen at any price: we are monitoring developments in the remuneration of deposits very closely. •  Lastly, securing maturity transformation activities can be achieved by encouraging the use of stable sources of financing. I have just talked about deposit-taking, but I should also mention the role played by the issuance of covered bonds. Backed by a dedicated portfolio of underlying assets, these securities proved to be resilient during the crisis and have since played an important role in the funding of European banks. 2. On the assets side  The rebalancing of banks’ liabilities structure is not sufficient on its own. In a general way, banks would also benefit from systematically making sure that their maturity transformation activities are profitable, by ensuring that the return provided by assets is proportional to the risks incurred. I would like to stress here that the greatest vigilance is required when the loans extended do not generate sufficient margins.