Although the SMR is only a year old and we are all learning by doing, there are encouraging signs that it is making a difference. 7  See FSB press release at: http://www.fsb.org/2017/02/fsb-assesses-implementation-progress-and-effects-of-reforms/. Additionally see FSB “Stocktake of efforts to strengthen governance frameworks to mitigate misconduct risks”, forthcoming March 2017. 8 The SMR came into effect on 7 March 2016. Insurers are required to meet similar standards under Solvency II and in future, the SMR will apply to them directly, as it will to other participants in FICC markets. 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  For firms, the SMR is clarifying and improving governance, accountability and decision-making processes. Senior Managers are increasingly focusing on building cultures of risk awareness, openness and ethical behaviour. In the words of one chairman “responsibility for culture has moved to the top of my agenda.”  9  For supervisors, the regime is helping identify weaknesses in governance and accountability, and encouraging the necessary changes. This is particularly true in cases where authority has historically been blurred such as in cross-border banking. Adoption is spreading. Some international firms are voluntarily adopting elements of the SMR’s certification requirements to strengthen their global operations. And the FSB is now explicitly reviewing the merits of such “responsibility mapping”. 10  Recent events  The SMR has also been adopted by the Bank of England. 11  We chose to because our mission demands that  we hold ourselves to the highest standards of governance and accountability.

There is reason to believe that capital intermediation via the securities market will increase at the expense of financial institutions. The elimination of foreign exchange risk, greater price transparency and harmonisation of market practices will increase liquidity in the market, leading to conditions similar to those in the US. Losing the advantage of operating in the national currency will result in keener competition in securities markets for brokers, issuers, investors and stock exchanges. National ties will be of less BIS Review 16/1999  –6–  importance as participants are drawn towards markets with the lowest costs. The integration of stock exchanges will increase. The Oslo Stock Exchange, for example, is one of several stock exchanges currently evaluating prospective partners. The possibility that the euro may lay the foundation for a European market for private bonds should be of interest to enterprises both within and outside the euro area. This market is large and well developed in the US, whereas European enterprises have primarily relied on bank financing. The introduction of the euro will also result in a broader and more differentiated selection of securities in a single currency, while increased competition in issue and investment services will probably make it less expensive to raise capital directly in the securities market. The elimination of currency risk in the euro area will also enable investors to focus more on credit risk, thereby improving their ability to evaluate this risk.