Interbank markets have started to return to normal, but there is still some way to go. To this end, central banks have mobilised considerable firepower. The action taken in the past two days represents the culmination of a process that has been underway for over a year. Central banks have adjusted their operational frameworks in four different areas: First, the maturity of their facilities has been extended, to help to unfreeze the money market beyond the short-term segment. Second, the range of eligible counterparties has been broadened to allow adequate provision of liquidity throughout the system. Third, the range of assets eligible as collateral for refinancing operations has been expanded. Lastly, extremely close international coordination between the different monetary authorities is ensuring that the actions taken by each of them is part of a consistent overall strategy, while taking account of the specific features of each monetary area. These exceptional measures should greatly contribute to restoring confidence and the smooth functioning of money markets. All in all, combined with the coordinated cut in policy rates on 8 October, they are now enabling European banks to obtain short-term refinancing at a rate that is 120 basis points below that of just 10 days ago. Governments are also now intervening to support banks' solvency and resilience. Thanks, in particular, to France's leading role, Europe is organising itself. Since the Paris Declaration issued by the member countries of the euro area, Europe has a sound and consistent action plan. It is already being applied and comprises three main aspects.

In-depth knowledge of the banking sector and the various financial institutions is extremely useful when it comes to reacting and making decisions during periods of turmoil in the credit and money markets. Since the beginning of the crisis, central banks have had to judge almost instantly the appropriateness of injecting liquidity in different forms and for different timeframes. It is therefore particularly important to be able to assess the quality of the market participants and  BIS Review 130/2008  5  the reality of their needs. More generally, it is crucial during periods of crisis to distinguish between liquidity problems and solvency problems. Therefore it is a considerable advantage to have all the cards in one’s hands. As regards the infrastructure of supervision, it seems clear to me that simple, robust and pragmatic plans have shown their efficiency compared to more sophisticated and complex schemes. During the last few months, at no time have I felt that our organisation was deficient or was preventing me from obtaining adequate information needed to make the necessary decisions. We have managed to deal with all situations, and I have observed the efficiency of our supervision system on a daily basis. Nonetheless, it is clear that an in-depth and comprehensive debate on the optimum structure of financial supervision in Europe is necessary. Structures have to adapt to the rapid integration of the markets. I firmly support the Lamfalussy process and I am convinced that the current efforts to improve and develop this process deserve our full attention.