europe cannot measure up to the usa on the financial markets, as the integration process has not come as far here. whereas the usa has a large, integrated market, europe has many small ones, which are also covered by different regulations. on the other hand, this means that there is great potential within europe's financial sector. intensive work is currently in progress to realise this potential. this includes the eu countries adopting a plan of action for financial services, that should be fully implemented by 2005. during the stockholm european council last weekend, the heads of state and government adopted the lamfalussy committee's proposals for a more effective legislation process in the field of finance in the eu. this was a very important decision. today it takes an average of three years for the eu to make decisions on new regulations. such a slow process is evidently a problem in the financial field, where development is otherwise very rapid. a regulatory system that does not correspond to reality can lead to both increased risks in the financial system and lower economic growth, as the finance markets'contribution to the rest of the economy will be lower than it could be. there is also a risk that financial operations will simply be moved somewhere else, where the regulations function better. role of the krona unchanged now that i have discussed the role of the euro in integration of the financial markets in the euro zone, i will take the opportunity to deviate from the subject slightly and mention briefly the euro's role on the swedish financial market. you will no doubt remember the discussions on the marginalisation of the krona prior to the introduction of the euro in 1999. some prophets of doom claimed that the krona would not be able to survive so close to such a large currency. swedish companies and individuals would spontaneously and rapidly go over to the euro. as we now know, this was not the case. according to the statistics the riksbank collects on a monthly basis from the swedish credit institutes, it can be concluded that the krona's share of the total assets has declined slightly. however, it has not been replaced by the euro, but by other currencies, probably chiefly the us dollar. at the end of last year, the euro comprised only 6 - 7 per cent of the total assets. the riksbank's studies also show that the total swedish activity in euro on the money market is relatively slight and in particular concentrated to the deposit and swap markets. there are still a few programmes of certificates in

and supervision of liquidity risk as well as greater transparency in the financial sector are important matters currently under review. further issues include regulatory treatment of the originate - and - distribute model and off - balance sheet entities, as well as procyclical elements in regulation. of particular interest is the issue of clearing and settlement arrangements in the unregulated credit derivative markets. one partial explanation of the uncertainty that has prevailed in the financial system recently is the absence of a resilient infrastructure for these markets. no central counterparties have existed and there has been no common market place for exchanging these instruments. as a result, trading has been fragmented and opaque, which in turn has implied that nobody has really known where the credit risks are and few have realised that these risks – directly or indirectly – actually have remained on the banks ’ balance sheets. clearly, there are many issues on the agenda and the course of events over the past year has underscored the need to get to work. but let me stress one thing very clearly : it is important that we get neither too zealous nor to indulgent about regulation. in times such as these, it is easy for opportunism to gain the upper hand, resulting in regulations that do more harm than good. for example, i am a little bit worried about where the discussion on procyclicality is heading. suggestions have been made that both basel - rules and fair value accounting standards should be relaxed to cut the banks some slack under stressed circumstances. in my opinion, this seems like a very hazardous way forward. i am also worried about what i in some instances have seen being proposed with regard to the regulation of credit rating agencies. in can agree that in certain aspects regulation in this area could be considered, for instance in relation to the use of credit ratings for regulatory purposes and also concerning some governance issues. but for me, it is quite hard to see how a more general regulatory intervention in this particular area could be justified. there seems to be neither any proof of an existing market failure, nor any convincing assessments on the benefits of imposing rules. on the contrary, as the credit rating business strongly builds on the confidence of those using the ratings, market mechanisms should be quite enough to provide an efficient output. if agencies cannot deliver qualitative and reliable credit assessments they will soon go out of business. therefore, the agencies'incentives to do a proper job should be quite enough without regulation. crisis management – preparedness needs to