At the same time, well developed arrangements for the exchange of information and the cooperation among supervisory authorities have become a prerequisite for the effective supervision of cross-border entities. In the area of financial stability, arrangements for financial stability monitoring and crisis management need to be tailored to the fact that liquidity and solvency problems at financial institutions are increasingly likely to affect more than one country. The institutional framework for banks is especially important. Given its pivotal role in channelling funds into the EU economy, a well integrated banking sector is a prerequisite for achieving a truly single financial market. In recent years, we have witnessed an increase in cross-border banking. The considerable competitive pressures in the global markets and the increasing saturation of domestic markets should normally spur further cross-border banking. Policy-makers have already launched important initiatives to step up cross-border cooperation in line with the growth of cross-border banking. While some challenges for the coming period certainly remain, impressive progress has already been made. In the area of financial regulation and supervision, the extension of the Lamfalussy approach to the banking sector and the establishment of the Committee of European Banking Supervisors (CEBS) are such milestones. Here, I would like to emphasise the crucial work performed by the CEBS, which develops common benchmarks and best practices for the consistent implementation of EU Banking Directives as well as agreed principles for cooperation between home and host supervisors.

In addition, the forthcoming revision of the Codified Banking Directive will provide a robust underpinning for greater cross-border cooperation among authorities, especially for large banking groups. The revised Directive will tighten the requirements for the information exchange and coordination between the consolidating supervisor and host supervisors. It will also assign the consolidating supervisor a coordinating role in the gathering and dissemination of information about the group as well as the planning and coordination of supervisory activities. Following these two major reforms, efforts should now focus on their effective implementation. As regards financial stability, there has been a significant increase in cross-border arrangements in response to the recommendations of the reports by the Economic and Financial Committee (EFC) on financial stability and crisis management. The important role of the Financial Services Committee (FSC), which was responsible for monitoring the implementation of the EFC recommendations, should be fully acknowledged at this point. With regard to crisis management, the 2003 Memorandum of Understanding between EU banking supervisors and central banks, and to which the new EU Member States adhered in June 2004, was a great accomplishment. For the first time, principles for managing financial crises that may have a cross-border impact were agreed at EU level. Nevertheless, the Memorandum may be not sufficiently detailed to cover large cross-border banking groups comprising several authorities, where crisis management is particularly complex. Given the potential far-reaching implications of financial disturbances involving such groups, the development of group-specific agreements could be an important avenue to explore.