1 600 000 1 400 000 1 200 000 1 000 000 800 000 600 000 400 000 200 000 marcet cap. ( l. a. ) volume ( l. a. ) pxd number of traded bonds 1994 1995 1996 1997 1998 1999 2000 2001 2002 what will the future bring to capital markets? it is evident that with limited share trading, there is not a very rosy future ahead. there are discussions about merging the markets in the region and possibly joining some european stock exchange. there are some speculations about the stock exchange in vienna wanting to be the market for the region [ vienna is the second smallest se in the eu. ]. however, individual countries would prefer to either remain independent, or to cooperate more closely with some bigger partners - such as the frankfurt stock exchange. as shown above, the financial sector is generally in good shape. there are some differences among the individual parts of the financial sector, but the main part [ the banking sector ] is as sound and strong as never before. this is due to several reasons, such as the improving legal environment, improving management, or even outright government financial assistance in the past. however, the greatest difference is due to the privatization to foreign banking institutions. these institutions have brought all the necessary components for successful long - term banking. the legislative and regulatory framework has been harmonized with the acqui communautaire. the harmonization has been confirmed by ec peer reviews and by the multinational financial institutions ( such as the imf and world bank during their fsap process ). of course, there is still a lot of work to be done. the legislation and regulation shall be more streamlined, the area of law enforcement needs to function more efficiently, changes in accounting standards must be made. but these tasks are not related purely to the eu accession. they would have to be done under any circumstances. the financial sectors in the new member states are functioning efficiently, and are stable and competitive. the majority of financial sectors are in foreign hands, well capitalized and well managed. institutions from the eu are governing the largest financial institutions in the new member states. introduction of the single passport policy will mean a change only de iure, not de facto. foreign institutions that wanted to provide their services in the new member states are already present there. i do not expect any rush of new players to the new countries of the european union. it is more probable that with increasing living standards of the population, the space for new financial products

’ penetration will increase as well. i expect to see increased competition in this area, as already established institutions compete for new clients. it is unlikely that many new financial institutions will enter the market, because the market is already saturated, and players who had a strategic interest in central europe have already established themselves. authorities from the new countries are already participating in committees and working groups established by the european commission and european central bank, so that rules, as well as the policy thinking are being coordinated and harmonized. challenges from the eu accession will therefore not represent any major risk. the problems and challenges that the new member states will face are not any different from those that are faced by the “ old ” member states, such as implementing the new basle capital accord, implementing the ias, increasing cross - border cooperation, monitoring activities of large complex financial groups, evaluating new complicated financial products, understanding risk transfer among different financial institutions. the transition will greatly benefit from the hard work that has been done during the economic transition and during the preparatory stages for the eu accession. it will be smooth and i do not expect any disruption of financial service in the new member states, or in the eu as a whole. it could be said that the financial sector is already in the european union. useful links • pavel. racocha @ cnb. cz • www. cnb. cz czech national bank • www. nbp. pl polish national bank • www. nbs. sk slovak national bank • www. mnb. hu hungarian national bank • www. bis. org links to other national banks