Accordingly, it is clearly important that credit institutions should actively pursue the work they have done so far. In this respect, I think it is safe to say that French banks operating in the international arena are making every effort to ready themselves for 2006. 3.3  New accounting standards should foster international harmonisation and promote greater financial transparency  The introduction of new accounting standards is a major undertaking for companies in general and for credit institutions in particular. The aim of this project is highly ambitious, namely to arrive at worldwide standards that can improve financial security and accounting transparency. This is necessary to restore confidence in financial markets. At the internal level, credit institutions must quickly adapt their information systems to these new requirements. However, there are in-depth discussions at present about the draft standards applicable to financial instruments. We have taken part in these discussions and advocated caution, in particular, in view of the strong temptation to give precedence to the markto-market and mark-to-model approaches, which are more sensitive to calculation parameters than to the actual situation of the reporting entity, with the result that earnings and equity likely to become abnormally volatile. I hope that the outcome of these discussions will lead to accounting procedures that take into consideration the realities of credit institutions’ operations and business practices. BIS Review 32/2003  3  As you are aware, the quality of the accounting rules applicable by banks is of fundamental importance for supervisors.

In this connection, I shall first briefly review the innovations I consider most significant and, secondly, I shall address the challenges posed by the new scenario for the authorities, and in particular for a central bank. Financial market innovations Any list of ongoing financial innovations inevitably highlights the weight of technology. The significance of the technological component in this new phase is such that it has ultimately lent its name to the process of change: Fintech. What is involved, however, is a broad and diffuse concept, which encompasses not only new highly technological firms, but any financial institution that is innovating through the application of new technologies. Occasionally, it is also used to describe new business models and even to refer to the basic technologies enabling the various innovations. The confusion surrounding the Fintech concept is illustrative of the confusion deep-change processes can cause. In these circumstances, it is easy to be swept away by excessive enthusiasm or by unwarranted pessimism, two options with little value added. It is undoubtedly much more useful to focus on separating those innovations with the potential to improve efficiency in the provision of financial services, cutting costs and increasing security, and those seeking to adapt to the changes occurring in demand, from those spurious novelties that provide no significant improvements and which should be blocked as soon as possible. In other words, what is truly important should be separated from what is simply showy.