feasible. that is also what is stated in the report by baron lamfalussy. as a matter of priority, the regulatory gaps should be filled in and the process of harmonisation in the stock exchange and securities sector should be accelerated. one example is the “ european passport ” for issuers. the forum of the european securities commissions ( fesco ) will be presenting a proposal on this shortly. at present, the creation of uniform regulations, combined with an intensification of cross - border cooperation in committees represents a better course of action than a “ big bang ”. centralised stock exchange and securities supervision would scarcely be able to function without a european regulatory framework. effective stock exchange supervision depends on being particularly close to the markets. national bodies possess such market proximity in a more or less natural way. ii the appropriateness of the present supervisory structures in europe is being studied by banking supervisors, too. the report commissioned by the ecofin council, known as the henk brouwer report, has confirmed that the existing structure of european banking supervision is - without any reservations - doing its job properly. even so, the report states that practical cooperation among those involved in banking supervision still has to be further optimised. among other things, that finding reflects a development that attracts little attention from the general public : banking supervisors have been continuously adapting themselves to the trend towards cross - border activities. they have been pursuing their own internationalisation strategy. the present system of banking supervision in europe essentially rests on three pillars : • harmonisation of the regulations ; • national regulatory competence ; and • bilateral and multilateral cooperation. bilateral cooperation is based on memoranda of understanding between the supervisory bodies. added to this, at the multilateral level there is the banking supervision committee at the ecb. this committee is filled by senior representatives of the supervisory authorities and central banks of all the 15 eu member states and facilitates the exchange of information and cooperation both among the national supervisors themselves and with the escb. one main area of the bsc ’ s work consists of macro - prudential studies on the stability of the eu banking systems. this includes, for example, the study on “ asset price inflation and banking stability ”, which has also been published. the committee thereby makes a major contribution to crisis prevention. in the converging european financial market, systemic crises are becoming an increasingly important issue. central banks, in particular, have a special interest in safeguarding the stability of the financial system. the prevention

in the federal funds market and global financial market developments, and present to the president their plans for open - market operations for his or her comment. open - market operations will be arranged shortly after this " call, " and the results are disclosed to the public generally within a few minutes. the desk is in the market on most business days, adding from $ 2 billion to $ 10 billion in reserves to keep the funds rate near the fomc's target. as an additional means for managing the fed funds, the federal reserve stands ready to lend reserves to depository institutions that request them. financially sound banks are eligible to borrow from the fed at what is called the primary credit rate, which to date has been set at 100 basis points ( 1 percentage point ) above the target funds rate. historically, reserve shortages occasionally caused the funds rate to " spike " well above its target, once even hitting 100 percent ( in 1991 ). the primary credit facility is designed to avoid such spikes by providing an elastic supply of reserves at a rate not far above the funds rate target. since the introduction of the primary credit facility, the rate has exceeded the primary credit rate only in a few unusual circumstances, such as the power outage in the eastern united states in august 2003. the federal reserve's multiple means of injecting reserves into the banking system - a belt - and - suspenders approach - was shown in its best light following the september 11 terrorist attacks. with a significant part of the financial system inoperative and with many payments not being made as scheduled, the banking system's demand for reserve balances rose sharply. those reserve needs were met initially through large amounts of direct borrowing from the fed. as market functioning improved, needed reserves were provided by means of open - market operations. the increase in the supply of reserves topped $ 80 billion by the end of the week. the funds rate and other market rates i have discussed at some length how the federal reserve manages the federal funds rate, the most direct instrument of monetary policy. as i have already hinted, however, monetary policy is effective only to the extent that federal reserve actions can affect a wide range of interest rates and asset prices. what is the link between the funds rate and these key financial variables? the interest rates most closely linked to the funds rate are those prevailing in short - term money markets. financial market participants are able to trade short - term liquid funds in a number of markets, including, for example, the market