With the present supervisory set-up, there is unfortunately a risk that it will be time-consuming to achieve joint assessments, and time is a scarce resource, especially in crisis management. A fourth challenge is how to coordinate decisions by the authorities. The central bank must decide whether to grant emergency liquidity assistance or not and occasionally a bank may have to be placed under public administration. All of these decisions have to be made at short notice and typically with limited information. For this to be effective there is a need for a clear line of command. For crossborder banks where many supervisors, many central banks and many ministries of finance are involved, this is complicated to achieve. Without prior agreements on responsibilities this is going to be even more complicated, and may very well lead to suboptimal solutions. The potential inefficiencies are probably enhanced by the differences in language and legal structure. The problem is further inflated by the inter-dependencies between the different countries. The decisions by one authority will typically have repercussions in many other countries. To alleviate these problems there are today many MoUs between the authorities in the different countries – both regional and on an EU basis. Such MoUs are important to foster cooperation and information sharing but are, in my view, not sufficient. They are not legally binding and address neither the need for joint assessments nor the underlying conflicts of interest. Instead they should be seen as an important first step in facilitating the handling of cross-border institutions.

Niklaus Blattner: Review of the Swiss economy: end-of-year media news conference Introductory remarks by Prof Dr Niklaus Blattner, Member of the Directorate of the Swiss National Bank, at the End-of-year Media News Conference, Zurich, 7 December 2001 *  *  *  11 September 2001: a test for the global financial system For a number of years now so-called systemic risks have received increasing attention from the central banks and from banking and financial market supervisory authorities. In extreme circumstances, systemic risks may ultimately lead to a breakdown of the financial system. They have their origin either in a transmission of liquidity and solvency problems between banks and other financial service providers or in the fact that numerous market participants are simultaneously affected by the same non-diversifiable risks. Examples of such risks are sudden, widespread and massive losses in the value of financial assets (stock market crash), serious malfunctioning of major financial market infrastructures, large-scale natural disasters or terror attacks which obstruct markets and market participants in economic or technical and physical respects. The consequence may be a substantial disruption of economic activity. The damage caused to the affected economies is liable to be correspondingly large. The terror attacks of 11 September 2001 hit the central nerve of the global financial system - New York, the major trading centre for the world's leading currency and the preferred location of the international banking and financial services industry.