Threats to financial stability in the current environment Having described the potential costs of financial crisis and why financial stability matters, I want to turn to my second question, why it matters now. By this I do not mean that we have detected any unusually marked amount of stress or weakness in the financial system. Indeed, I cannot resist at this point expressing some thankfulness that we are managing to hold this discussion in relatively calm times (although this is the sort of comment that might be better saved for the closing address at a conference rather than the opening one). The last international conference the Bank sponsored on a financial stability topic, back in September 1998, followed closely on considerable turbulence in global bond markets and in fact managed to coincide with the incipient collapse of LTCM. As we found out shortly afterwards, we were lucky to have any American colleagues at all at that event! Rather, I mean that the financial system, and in particular the banking system, is undergoing substantial change, both in its external environment and in the way it manages its risks and is regulated. Globalisation, consolidation, conglomeration within and across sectors, technological change: these are not new developments, but they are continuing and intensifying. These developments present new opportunities to banks, as financial markets open up and mature. But they also present challenges.
The establishment in recent years of regulators like the FSA with responsibility in a single body for bank and insurance supervision will help to achieve progress in this area; indeed the convergence of risks being taken by financial institutions of different origins is a central plank underlying the need, certainly in the UK, for an organisation like the FSA. Conclusion I feel aware that throughout this address I seem to have repeatedly stressed the importance of advancing our analysis of systemic risk and at the same time the huge complexities involved in this task. Having highlighted the difficulties, it is now conveniently time to hand over the podium to those who may have some of the answers! I'd like to end by referring back to my statement of our objective for this conference, namely to achieve an advance in our understanding of systemic risk. This is of course not our only objective: we also hope that you manage to enjoy the opportunity of meeting with so many colleagues from around the world, enjoy the Bank's hospitality, and for those of you from overseas to enjoy your visit to London. Thank-you. BIS Review 43/2001  5