Furthermore, we must avail of the efficiency provided by the technology, in sharing our information. A joint web-site can be established, where we can find important information, interpretations, or share its experience regarding supervisory issues or financial stability issues. When mentioning this ways of cooperation, I am not trying to neglect what is already happening and I am mindful of the fact that there is a trade-off between the advantages of such cooperation and its costs. We should also point out that Memoranda of Understanding’s can not act as a substitution for cooperation in practice. It is important we maintain close contacts with our counterparts, on exchanging regular information on general trends and issues of respective banking systems in normal times, as it serves to establish confidence for future cooperation, particularly during distress times. Otherwise, such official cooperation agreements will do little in making a real difference. Let me conclude by saying that the objective of reaching and maintaining the financial stability is not an easy task but we could contribute a lot in its achievements by enhancing our efforts to make sure that financial market institutions are performing soundly in a stable macroeconomic environment. Our contribution can be much more effective if it is properly coordinated regionally. Such cooperation will ease our efforts in improving supervision capacities, avoid cross-border regulatory arbitrage and will serve our efforts to meet our objective of integration in European financial markets.

There are also common efforts to fully open our economies and to attract foreign capital. As we are in the process of fully opening our markets, we are benefiting from increased competition, improved productivity and efficiency, and increasing quality of services for our citizens. But, we are also facing several uncertainties and risks. Markets remain segmented and their infrastructure faces difficulties in supporting new and imposed developments. Market infrastructure deficiencies exacerbate their shallowness and make it difficult for various market participants to act in order to meet their business objectives and manage their risks. The technological improvements have to fully show their effect in meaningfully reducing costs of financial services. Regulatory gaps in different areas of local financial markets create the conditions for regulatory arbitrage and may adversely affect the supervisory work. BIS Review 103/2006  1  Therefore, erroneous and costly decisions are unavoidable. The financial situation of single market participants, due to market segmentation, is highly affected by their capacity to find financial support in the international financial markets. In reality, this leads to an increasing gap among so called “big” and “small” or among foreign and locally owned financial institutions. Real economy development is an additional source of risk for financial markets. Such interaction should be carefully watched to better understand financial market trend in the future and identify financial imbalances in a country and regional level. Indeed, we are all experiencing a construction “boom”, where residential house prices have increased considerably.