this regard. just this last weekend, g20 ministers and governors in korea reviewed this process, which will now be examined by heads of state in toronto in early july. the momentum is here, and we fully support this overall process. the second shortcoming was the insufficient coordination in financial regulation before the crisis, which encouraged regulatory arbitrage. this was the unavoidable result of the disparity between the increasingly global financial players, and the largely national approach to financial regulation, with only relatively weak coordination at the international level, despite the remarkable efforts of the basel committee in respect of the banking sector. the crisis demonstrated quite clearly that proceeding too far down the road of deregulation is not always conducive to better functioning markets. rather, markets require an effective regulatory and supervisory infrastructure to function properly. of course, setting common rules in complex and innovative fields such as finance requires finding the balance between allowing financial innovation and growth, and preserving stability for the good of the real economy. but it should remain foremost in all our minds that the prime purpose of the financial sector is to serve the real economy, not the other way around. changes to the regulatory environment should reflect that. given the current downturn and the volatility of financial markets, it is imperative that the timelines for regulatory reform agreed by the g20 in the autumn of 2008 are met. policymakers should remain committed to setting rigorous standards and designing appropriate transition periods that will allow countries and financial institutions to implement the agreed regulatory standards consistently and fully. in this context, the basel committee ’ s reform package, released last december for consultation, forms one of the cornerstones of the financial regulatory reform. it is important, however, that the cumulative impact of the reform package on financial institutions and the real economy is thoroughly assessed. we will carefully consider the impact analysis presented by the iif in the process of evaluating the multifaceted impact mechanisms of regulatory changes. there may well be differences in views on the most appropriate way of computation as well as on underlying assumptions. we have to deliver a much safer and much more resilient financial system that it to the benefit of the sustainable development of the real economy. 2. the evolution of global governance let me now turn to how the system of global governance is evolving in response to the crisis. i see three major trends : first, the scope of international cooperation is broadening significantly. second, the efficiency and legitimacy of global governance is being addressed : the mandates and

in the single financial market. some initiatives were started before the crisis and are still in progress. others have been launched since the outbreak of the crisis. i would like to briefly mention just some of these important developments. first, europe ’ s new supervisory structure, based on the european systemic risk board and the three european supervisory authorities, is a major step forward in ensuring that the financial system as a whole is supervised in a more harmonised and coherent fashion. it reflects the full acknowledgement that the externalities deriving from the financial system are no longer national. they are increasingly interconnected across the european market and beyond. second, there is also a new set of new legislation to reform financial markets. it is a comprehensive package covering not only the trading level, but also – for the first time – the infrastructures for clearing and settlement. nothing is being missed out. mifid – which deals with trading and investment services – is currently being updated. a new regulation on clearing houses – called the european market infrastructure regulation ( emir ) – is also bis central bankers ’ speeches being proposed. the objective of mifid and the emir is not only to make markets safer, sounder and more transparent in the wake of the financial crisis ; they also aim to create a level playing field in europe, to remove barriers to competition, and ultimately, to strengthen the financial market integration process. on the settlement and issuer services side, a proposal for a new legislation on csds is expected soon. this will help to ensure a level playing field between the different business models operating across europe. and on the custody side, the proposed securities law directive will also help provide legal certainty and facilitate cross - border business. t2s fits extremely well into the financial market reform process. it very much complements the regulatory initiatives being pursued by the european authorities to significantly strengthen the single financial market and its infrastructure. t2s will – for the first time – create a single market in the settlement services space. combined with legislation on csds and ccps as well as mifid, t2s will stimulate a new competitive environment in post - trading. over the longer term, t2s will deliver significant benefits to the european economy. first, in t2s it will be as easy to settle cross - border transactions as domestic ones. this will enhance the ability of issuers and investors to reach across national borders. it will lower the cost of capital for issuers. it will allow investors to divers