The globalisation of financial markets may increase systemic risk, through contagious financial disorders originating in poorly regulated financial centres. As Alan Greenspan (1997) mentioned, ’the efficiency of global financial markets, engendered by the rapid proliferation of financial products, has the capability of transmitting mistakes at a far faster pace throughout the financial system in ways that were unknown a generation ago, and not even remotely imagined in the 19th century.’ Depositors, investors and counterparties may be exposed to foreign jurisdiction risks which they are not in a position to monitor or control. Besides, the co- existence of uneven national regulations and global markets may severely distort competition between financial institutions. The growing integration of markets calls for international cooperation among supervisors. Accordingly, the Basle Committee on Banking Supervision was established in 1974 and is involved in establishing a common regulatory framework. The Basle Committee and the International Organisation of Securities Commissions (IOSCO) issued co-ordinated guidelines on risk management on OTC derivatives business. IOSCO also adopted the so-called Windsor Declaration on co-operation between supervisors of futures and options markets. Industry initiatives also aimed at strengthening prudential standards in international financial markets. The Group of Thirty has proposed minimum standards relating to netting arrangements, settlement procedures and managerial oversight of derivatives risks. The International Securities Dealers Association (ISDA) has established good practice guidelines for the management of derivatives and FX business globally by broker-dealers. And in early 1996, 49 exchanges and clearing houses announced an agreement to exchange information on their members’ risk exposures in different markets.

Mr. Singer said that while the central bank remains worried about the possibility of another “hiccup” in the eurozone, he is less concerned than he was before the ECB first indicated in May that it was preparing to take action. “The outcome was more positive than I would have expected five months ago, and things look less gloomy than they appeared before they (ECB policy makers) found some consensus,” he said. The eurozone’s persistent economic weakness has been the main concern for policy makers gathered here over recent days. Those concerns were heightened by a run of very weak data from Germany that indicated the economy may have contracted for a second straight quarter in the three months to September. Mr. Singer believes those figures from August that recorded large falls in industrial production, manufacturing orders and exports are not reflective of the underlying state of the German economy, but instead the fact that there was a larger number of holidays than usual taken during that month. He said the Czech economy, which has a similar focus on industry rather than services, had experienced similar volatility in output over the summer months. “I would be unpleasantly surprised if the weakness in Germany continues,” he said. With its benchmark interest rate already at 0.05%, the Czech central bank last November pledged to maintain the koruna’s exchange rate at above 27 to the euro, effectively setting the firmest acceptable level for the currency.