It covers an array of conceptual and operational issues such as: the need for integrated financial supervision; risk-based supervision; corporate governance for non-banking financial institutions; the risk management capacity of financial institutions; operational and systemic risks from an integrated perspective; macroprudential and micro-prudential supervision instruments; central bank oversight of financial markets infrastructure; supervision of conglomerates; stress testing for a sound financial system; institutional coordination at the European Union level, and, not least, consumer protection. BIS central bankers’ speeches  1  Europe is not yet out of the woods when it comes to overcoming a very deep financial and economic crisis. There are some good signs, but there is still quite a long way to go – as Mario Draghi recently reminded us in the Committee on Economic and Monetary Affairs of the European Parliament on December last year. The major lessons of the financial crisis are incorporated into this reform. We mostly recognize now that price stability is not sufficient for ensuring financial stability and light touch regulation has failed. There is a derailment of finance, that needs to be corrected, and this is the objective of reforms under way in Europe and the United States. Interconnectedness has grown immensely in the latest couple of decades against the backdrop of technological change (new IT technologies) and financial deregulation. Consequently, systemic risks have grown enormously, banks and other financial entities have neglected them and regulation and supervision underestimated them.

Generally speaking, real appreciation leads to deepening of the current account deficit, but negative effects would be partially mitigated, having in mind that it does not come from erosion in the external competitiveness of the economy, but is to some extent caused by the sound macroeconomic factors, such as the higher productivity. 4. Uncertainty related to the future inflows of private transfers. Private transfers, as a component of the balance of payments that registers surpluses, traditionally compensate a significant portion of the negative trade balance of the Macedonian economy, on average around 60-70 percent. The upward trend was significantly intensified in 2005 when the transfers increased substantially and reached approximately 18 percent of GDP. That's how they compensated about 90 percent of the negative trade balance and brought the current account deficit to the relatively low level of 1.3 percent. Fast growth of the transfers, given the inability to actually identify the sources from which they origin and consequently the difficulty to anticipate their future size and future sustainability, is another factor that produces sensitivity of the Macedonian economy. In this context, one may even more emphasize the need of implementing the adequate structural reforms aimed at strengthening of the export sector and its competitiveness at the foreign markets. Dear Ladies and Gentlemen,  BIS Review 100/2006  3  Integrating of the economy at the global capital market implies larger exposure towards larger and potentially more unstable capital flows.