This behaviour has been observed in the recent financial turmoil both as regards investors’ attitude vis-à-vis emerging economies and certainly also vis-à-vis markets in industrialised countries themselves. One of the most effective recipes for countering this behaviour is full transparency of each particular entity, of each particular country, of each particular borrower, of each particular signature. Full and reliable transparency for all, both public and private sector entities, is needed to allow a proper judgement of the merits of each case. In particular, more transparency between market players is necessary for proper risk management. In a recent report by the Basel Committee on Banking Supervision, recommendations are made to strengthen prudent management of banks’ exposures to highly leveraged institutions (HLIs). Just like any other financial institution, HLIs should comply with minimal transparency, disclosure and regulation requirements anti overall leverages should be monitored to avoid risks of systemic crisis or disruptions in the international markets;  í  Secondly the decision to introduce a new capital adequacy framework to replace the 1988 Accord is an important step towards a more comprehensive approach to addressing risks and should, in particular, focus on internationally active banks. The new framework should significantly improve the way regulatory capital requirements reflect underlying risks;  í  Thirdly the design and implementation of internationally agreed standards is of utmost importance for ensuring effective transparency at the international level. For instance, there is evidence that in some cases discretionary accounting practices are instrumental in enabling banks to comply with international capital regulation.

The EMU will reinforce monetary and financial stability The international role of the euro With regard to the international role of the euro, let me say that the Eurosystem does not regard it as part of a zero sum game in an atmosphere of confrontation. On the contrary, I view it as a positive sum game, based upon close international cooperation and certainly not on confrontation. The international role of a currency is a complex matter. A currency can be used by different groups of economic agents for different purposes, as an anchor and reserve currency on the official side, as an invoicing and payment currency for international trade, as well as a currency of denomination for financial assets, on the private side. BIS Review 81/1999  6  My understanding of the process towards internationalisation of the euro is based on the following observations: í  firstly the euro , as I said before, has the full legacy of the most credible currencies in Europe, taking into account the fact that the European monetary convergence process has been based upon a benchmarking principle. The euro is not starting from scratch but from the solid soil of currencies having proved their solidity over time like the franc, the DM, the guilder, and so forth;  í  secondly, the policy which is pursued by the European Central Bank is a policy of stability, credibility, low inflation so that the euro will be an excellent store of value. This is called upon us by the Treaty.