considerable headway. in particular the banking supervision committee set up at the newly established european central bank is taking due account of the greater necessity for co - ordination at the european level. notwithstanding this strengthened cooperation, banking supervision in the european monetary union will remain a national responsibility. that is in line with the principle of subsidiarity and takes due account of the greater effectivity of close - at - hand supervision that is able to respond rapidly to regional special developments. regarding the advantages of a close - at - hand supervision i can not see any current need for a centralised supervisory authority neither on the european level nor as a „ super agency ” or „ umbrella supervisor ” on the international level. co - ordination in the field of supervision has to be accompanied by harmonisation in the field of supervisory legislation. besides risk considerations, competitive factors argue in favour of harmonised provisions in the single european market for financial services. the objective must be to ensure a level playing field, and to prevent national supervisory regulations from being misused as instruments of competition policy by proven standards being relaxed solely in order to make one ’ s own financial centre more attractive. in this context one has to discuss as well, if and to what extent there is a need to extend international supervisory standards into offshore centers in order to make sure that financial players do not try to shift their business to such places with the aim of evading regulatory demands. national central banks, which either play an integral part in banking supervision ( as in germany ) or actually have the primary responsibility for all aspects of banking supervision ( as in greece ), are of outstanding importance in the field of banking supervision in emu. a weighty argument in favour of the participation of central banks in banking supervision is, in particular, their great proximity to the market, which they gain from their own participation in financial market operations as part of their lending business and through their performance of fiscal agent functions. this enables a central bank to advocate market - promoting deregulation measures, which are at the same time acceptable in prudential terms. furthermore, there are many points of contact / interactions between the duties of a central bank and those of banking supervisors. v within emu it will be essential for banking supervisors, on the one hand, to exploit the disciplining effect of fiercer competition by means of suitable approaches to regulation in order to strengthen the sense of responsibility of market players. on the other hand supervisors have to prevent excessive risk - taking on the part of particular

will change the banking sector in this country. quite generally, however, the fact of the matter is that size alone by no means implies a hallmark of quality. the hoped - for commercial advantages of such mergers must materialise first. in terms of banking supervision, “ mega - mergers ” involve the drawback that banking structures become less transparent and groups become more difficult to control by the management. overall, the number of institutions that are to be classified as “ too big to fail ” will increase. in the context of the growing competition, there is also a danger that banks will run greater risks in order to defend their market positions and make attractive profits. that may lead to a tendency towards increasing fragility and a higher probability of market exits, which would make additional demands on banking supervisors. furthermore, the current problems of the hedge fund ltcm show that the danger of excessive risk taking is not limited to banks. against this background the precise measurement and monitoring of risks, sufficient transparency, a strong capital base and an adequate supervision become factors of increasing significance. this does not only apply to supervised banks but principally to other major players on the financial markets. with regard to hedge funds my preliminary conclusions are threefold : 1. bank loans to hedge funds should be limited in relation to the funds ’ own capital to contain their leverage and thus excessive risk taking ( for example ratio of own capital to loans 1 : 10 ) 2. hedge funds ’ exposures should be made transparent through for example an international credit and derivatives register. and 3. banks should basically not be allowed to invest in hedge funds. coming back to my main topic, competition in emu : in particular, the following points will be of paramount importance to banking supervisors, to enable them to adjust to the growing competition within emu and cope with its consequences. • the continuation and deepening of the harmonisation of european banking legislation and of the pan - european co - operation among banking supervisors ; • the exploitation of competition to strengthen the market players ’ sense of responsibility and self - discipline ; • the creation of adequate transparency for both market players and supervisors ; • the further development of the capital provisions, as the keystone of banking supervision. allow me to elaborate on these points in greater detail : iv in view of the progressive integration of european financial markets accompanying emu, there is a greater need for co - ordination between the european supervisory authorities and a need to press on with the process of the european harmonisation of banking legislation, which has already made