Charles Kindleberger used to say, “the international financial system doesn’t work unless somebody takes the responsibility for it” (as quoted by Fisher, 2008).   Second, those participants are more diverse from the point of view of their economic structure, their demography, their level of development, and, more importantly, their social choices and preferences. For instance, different saving rates may be seen as resulting from divergent time preferences. Likewise, asymmetries in financial development may, to some extent, reflect different choices and tradeoffs between efficiency and stability in the organisation of capital markets and the architecture of financial systems.   Finally, linkages between economies, whether through trade, capital or more intangible “confidence” channels are continuously getting stronger as witnessed by  1  See, for instance, the proposals aiming at separating the “surveillance” and “financing” functions and making the former more independent from the Executive Board. 2  BIS Review 76/2010  the speed and amplitude of contagion of economic and financial shocks during the last eighteen months, which took everybody by surprise. Pending some economic catastrophe, these characteristics will persist over time. A large number of different countries, with different preferences, will permanently be linked and interdependent through active, but imperfect capital markets. Any future international architecture must be compatible with those basic features of today’s world which, prima facie, create the potential for more complexity and, maybe, instability. International capital markets and the allocation of savings Let’s suppose, for an instant, that there is a unified, fully integrated, and complete world capital market.

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.