such reforms should be aimed at increasing labor utilization as well as boosting labor productivity, for instance by increasing flexibility, improving education and technological diffusion as well as promoting innovation. indeed, recent challenges from the new member states, e. g. in terms of attracting foreign direct investment, have raised the urgency for western europe to adapt its structures in order to boost competitiveness. these spillover effects are welcome eventually, as they accelerate structural change, which promotes economic growth. at the end of the day, only dynamic economies can sustain modernized, but still generous social systems in europe. the integration process in europe will mutually strengthen the eu and its current and future member states. bulgaria and the other countries from central and eastern europe certainly stand to gain most from the related catching - up and convergence process. but the eu - 15 member states, especially those with strong trade links to this area, for example austria, will experience positive effects as well. while there may be adjustment costs in some sensitive areas, not only for the eu - 15 but also for the new eu member states, these costs should be of a temporary nature and will be outweighed by far by the positive effects related to intensified foreign direct investment flows, trade creation and increased competition. actually, we do not have to rely on vague projections anymore : a considerable part of the once expected benefits has already become a reality. supported by intensified trade, the stabilization of expectations and the decrease in interest rates, bulgaria and the new eu member states are experiencing an impressive catching - up process, with economic growth rates significantly above those of the euro area. in concluding, austria joined the eu more than a decade ago. naturally, our honeymoon did not last for the entire decade. however, it is fair to say that austria ’ s first 10 years in the eu have been an impressive success, certainly for us, and i believe for the eu as well. the economic data give us an unambiguous verdict. having said this, the eu is not only about markets, trade, profits and losses. the eu is much more than that : the eu is the most important and successful peace project europe has ever seen. visionaries like winston churchill, robert schuman and jean monnet were needed to outline how to overcome deeply vested, ingrained divisions within europe. today, the eu not only comprises countries from the western part of europe, but also free and democratic countries from central and eastern europe. bulgaria is at the threshold of joining the eu.

of the financial system, while facilitating a clear distinction between the objectives of prudential regulation and financial stability, and the broader developmental objectives. it will also sharpen the regulatory focus on the management of risk in the financial system in a manner that will more effectively address the basic components of credit, market, operational and insurance risks. for the regulated institutions, this new structure is also intended to promote greater efficiency and competition in the financial system by : • minimising regulatory overlaps and duplication within the system ; • preserving regulatory neutrality in the management of similar risks between different financial service providers ; and • ensuring more efficient use of regulatory resources. the bank will be communicating the details of the new structure to the licensees in november and december this year. a smooth transition will be ensured to maintain continuity in the major ongoing regulatory initiatives currently being undertaken by the bank, and clear arrangements will be made for dealings between licensees and the central bank during the transition. under the new regulatory landscape, the relationship between the bank and the regulated entities, and thus, the supervisory expectations, will change, as the prudential framework evolves towards a predominantly principle - based and risk - based regulatory approach. there will be a greater emphasis on corporate governance, integrity and transparency as the foundations for industry players so as to maintain investor confidence and public trust. under this environment, it is also envisaged that insurers, individually or collectively, will play a bigger role in developing market conduct standards, fostering fair market practices and improving financial literacy among consumers. moving forward, as market discipline improves, and insurers and takaful operators are better positioned to implement selfregulation, further deregulation can be expected. a differentiated regulatory approach will increasingly be adopted, where companies that exhibit strong corporate governance and risk management practices will be given greater regulatory flexibility. commensurate with the diversity and complexity of products and services, the continuous upgrading of risk management practices, with improvements in governance standards and enhancements of information management systems will be critical. with the impending implementation of the risk - based capital framework, the responsibility for the implementation of sound risk management and market conduct governance, as well as assessment of risks and management of the financial condition of an insurer, will rest increasingly with the board of directors and senior management of the insurers. integral to the increased flexibility provided under the new regulatory landscape is the highest standards of integrity and ethics in the industry. indeed, the very foundation of insurance