Challenges stemming from integration Two major challenges for authorities in charge of financial stability emerge from the common wholesale banking system: vulnerability to common shocks and potential contagion of major problems across many countries, should such problems arise. Let me take the issue of common shocks first. Clearly, integration opens up a wide range of opportunities for growth and contributes to increasing the resilience of the system. It brings along a wider range of funding sources and – on the asset side – the degree of diversification of exposures increases. But integration also renders financial institutions more exposed to common shocks. For the largest banks, area-wide risks affecting specific lines of business increasingly matter more than the home country-related risks. One way of illustrating this point is to take a look at banks' share price development. Since the beginning of the year, the share prices of almost all major European banks have declined. The 30 largest banks have lost, on average, around 25% of their value. The overall deterioration in global macroeconomic conditions and financial market volumes has affected all institutions, as banks' profit outlook has deteriorated following the likely increase in provisioning needs and reductions in income from market-related activities. However, the stock market changes for these 30 banks range widely from a small plus to very significant minuses of over 50%. In line with the notion that the home-country risks have lost in importance, banks' nationality is no longer a very relevant determinant of the size of the stock market reaction.

As I have already mentioned, all the key participants in the settlement system have initiated measures to reduce operational risk and improve contingency arrangements. Safety in the Norwegian retail payment system appears to be high. Therefore, I believe that the Norwegian retail payment system largely satisfies the principle of safety and operational reliability. As I have already said, Norway has a very efficient retail payment system. Therefore, the system complies with the core principle concerning efficient and practical payment solutions. Banks have clear rules about the criteria which new participants must satisfy in order to gain access to the common systems. The terms and conditions are publicly disclosed and the Norwegian Competition Authority has had no comments to them. The core principle concerning objective and publicly disclosed criteria for participation is therefore regarded as satisfied. The systems’ organisation largely satisfies the core principle concerning effective,  BIS Review 66/2002  9  accountable and transparent governance. The additional recommendation, i.e. compliance with the core principle concerning final settlement on the day of value, is also satisfied in Norway. Internationally, central banks have also shown increasing interest in efficiency in retail payment systems. Norges Bank’s work with retail payment systems In the spring of 2002, we published a policy document that provides an account of our responsibilities in the payment system area. In this document, we discuss our earlier work in this area and premises and plans for future work. Norges Bank monitors developments in the market and documents this in its Annual Report on Payment Systems.