in place, even if they do not have any legal powers. it may therefore be easier to reach some progress in europe than elsewhere in the world. still, even in europe, it is not very likely that a full fledged pan - european supervisor can be established in the near future. therefore, my proposal should be seen as a gradual process rather than a fast - track to a european fsa. institutional set - up and powers of eofs let me now go into more detail on how the eofs would work. as i said earlier, the mandate of the eofs would be to perform a form of supervision of the major cross - border banks at the european level. as the focus is strictly on prudential supervision, the supervisory tasks related to market conduct and consumer protection would still rest with national supervisors. aligned with the eu - principle of subsidiarity the supervisory duties of the eofs should only include the banks with major cross - border activities. what i have in mind is a three layered structure. the 8000 or so european banks which mainly operate domestically would remain under the exclusive competence of national authorities. the regionally oriented banks, active in a few countries, could use a structure similar to that of today, where supervisory colleges deepen the cross - border cooperation. the limited number of truly pan - european banks would on the other hand be dealt with by the eofs. in the first step the tasks for the eofs, would in my view, be threefold : firstly, it should gather information about the cross - border active groups. secondly, with the information acquired, unified risk - assessments should be produced for the banks subject to eofs supervision. the third and final task should be to oversee the activities and risks of these banking groups. to set up the eofs one would, to start with, need to second staff from national supervisors and central banks. initially the eofs should probably only have limited powers, namely to collect information and undertake on - sight inspections together with national supervisors. all other powers, such as licensing activities, regulations, interventions and corrective actions would still remain the responsibility of national supervisors. consequently, the eofs would act alongside the national authorities producing comprehensive risk analysis of the designated banking groups and based on those analysis give advice on policy actions to the national authorities. in the event of conflicting interests between authorities the eofs could also act as neutral mediator. further, a coordinated european

stefan ingves : regulatory challenges of cross - border banking – possible ways forward speech by mr stefan ingves, governor of the sveriges riksbank, at the reserve bank of australia, sydney, 23 july 2007. * * * introduction as the integration of financial markets has picked up speed in recent years the subjects of supervision and crisis management of internationally active banks have gained in importance. i myself have on several occasions argued that policy actions are needed in order to cope with the challenges arising from financial integration. today, i will elaborate on one of my ideas, namely the creation of a special body for supervision of the major crossborder banks in europe. for the sake of this speech let us name this body the european organisation for financial supervision ( eofs ). lessons from the past before elaborating on my proposal let me start by noting that financial and banking crises can be costly. from history we know that the economic and political crisis costs can be very large. the us depression and the hyperinflation in germany during the 1930s are clear examples. after the second world war, the conclusion was that the financial sector had to be heavily regulated. this gave the national authorities a certain control over the risks in the different national financial sectors, but at the same time regulation stifles competition, product development, efficiency and proper risk management. eventually, these inefficiencies became large and apparent and many countries started deregulating in the 1970s and 1980s. in my country we have painful experiences of a banking crisis that occurred partly because the new deregulated environment posed new challenges for banks as well as for regulators ; challenges they were not prepared for. eventually banks developed more appropriate risk management techniques and supervisors adopted a more risk - and process - oriented form of supervision rather than the previous rather formalistic type. this has clearly lowered the risk of financial crises. internationalisation of banking also after the deregulation, most banks have remained predominantly national. only in the last decade have we seen the emergence of some big cross - border banks with major activities in several countries. and this financial integration is accelerating. let me here be perfectly clear. this development is positive for the economy. it stimulates competition and product development across countries. it also means that the banks can profit from economies of scale and scope. the spread of cross - border banking has reached different levels in different parts of the world. in europe it has been increasing rapidly in the last few years, but there are