The respect for the independence of financial supervision authorities and the cooperation between them is an important indicator for the preparedness for EU accession. I would like to emphasise in particular the requirement for institutional financial and personal independence of the central bank as stipulated in article 130 of the Lisbon Treaty. Let me now turn to the challenges ahead of our project. First of all, the EU response to the crisis envisages fundamental changes in both the legal and institutional frameworks of financial regulation. Most of the EU directives and regulations are currently being changed. (Mr. Simeonov will talk about these later) This is a challenge for our project, and I would like to suggest that we take into consideration the latest EU acquis communautaire in our joint work. That is why we included in our team the experts who are members of the EU committees and working groups in the area of financial supervision, including the Committee of European Banking Supervisors, Economic and Financial Committee, Financial Services Committee, Committee of European Securities Regulators, where all these novelties are constructed. This will help the project to benefit from the most recent developments in the EU financial supervision policies and legal framework. The other challenge is related with the ongoing crisis which calls for an immediate response from the national authorities and is of utmost importance. Therefore, I believe we have to focus our activities as much as possible on helping the Montenegrin authorities in addressing the challenges of the crisis.

This was perhaps the response to rising income inequality, as emphasized by Rajan (2010), and the lack of other policies to correct this problem in a fast and efficient way. Ironically, the crisis affected more intensely precisely those that were supposed to benefit from “financial inclusion.” There are many other cases in which well intentioned developments are implemented through weak policies. Take the case of interest rate ceilings. In order to promote fairness, many countries introduce limits on the interest rate on loans. This policy attempts principally to protect people with disadvantages and allow them to participate in the financial system. If this ceiling is set low enough, it may end up generating exclusion rather than lower financial costs for households, who may end up paying much higher interest rates in informal credit markets. This is not the place to analyze all the causes and culprits of the crisis, but it is worth discussing certain aspects that are frequently singled out by the general public. First and foremost, the crisis was caused by the irresponsible behavior of the financial industry. The structure of incentives was unsuitable. It led to excessive risk-taking without proper risk management. Compensation was heavily biased towards deal-making, regardless of the quality of the deals. Commissions and fees were a very important component of the compensation scheme. In the end, all that mattered was granting credit indiscriminately, maximizing packaging and selling securities, etc. This was at the foundation of the originate-and-distribute model of financial services, and served to increase leverage to unsustainable levels.