When market players rely on converging risk evaluations, they tend to take the same decisions at the same time, thus amplifying the initial shock to prices and trading volumes. All these factors have one consequence in common: they encourage homogenous behaviour and reactions to the detriment of the diversity that is conducive to the smooth functioning of financial markets. 2.2  For this reason, we could reflect on some ways – together with the financial industry – on possible ways to foster behavioural diversity in global markets. To safeguard the smooth functioning of the markets, and in particular an efficient pricing mechanism, it would be opportune to protect, and even reinforce, the diversity of behaviour on the markets. This necessary diversity is merely the echo of the different time horizons, strategies and reaction functions of market players. On this point, I would like to explore with you a few possible avenues. 2.2.1  First and overall strengthen the continuing efforts aiming at market transparency:  -  Experience shows that uncertainty and incomplete information are determining factors in mimetic behaviour. These shortfalls in market transparency make herd behaviour seem rational to agents, who prefer to follow bigger participants, who are thought to be better informed, rather than develop their own analysis. Strengthening transparency therefore is, more than ever, a priority. -  One of the objectives of transparency is to enable better differentiation of borrower creditworthiness. A key feature of mimetic behaviour is that all borrowers are "tarred with the same brush".

Temporary factors could still affect price developments for some months to come: health concerns related to meat consumption and the consequences of the outbreak of foot-and-mouth disease could continue to affect unprocessed food prices. Furthermore, pass trough of past rises in oil prices and the depreciation of the euro are likely to affect price developments for some months. Let me now turn to the question of International Financial Architecture. Impressive progress has been achieved in the recent years to reinforce international financial stability and to enhance prevention. We must continue our efforts toward further progress as regards the reform of the financial architecture. I also think that fruitful lessons can be drawn from the assessment of the new characteristics of financial markets and their impact on financial stability. 1. We must pursue and reinforce our efforts towards a renewed international financial architecture. These efforts should tend to improve prevention and management of financial crises. 1.1  Strengthening prevention  Strengthening prevention calls for parallel efforts from all actors, international financial institutions, investors and public authorities. Prevention lays on appropriate surveillance and adequate macroeconomic policies. 1.1.1  As regards surveillance, much progress has already been achieved:  -  In the institutional field, important changes have recently occurred: let me mention the impressive work carried out by the Financial Stability Forum in 1999 (e.g. reports on Highly Leverage Institutions, Capital flows, Incentives to Foster Implementation of Standards). I could also quote the work of the G20 or the International Monetary and Financial Committee.