interface with infrastructures. it is important to ensure that individual member behaviour cannot threaten the smooth - functioning of the system. some incidents during the recent market turbulence revealed issues around members ’ processing capacity, underlining the value in member - level testing to ensure that participants can always support the delivery of the network benefits from the smooth operation of the infrastructure. ( ii ) ensure effective international cooperation in oversight and operations, and coordination in risk assessment activities 44 the second main challenge is to allow market participants to reap the benefits of globalisation, while ensuring that the risks are adequately controlled. an extended and highly connected network can simultaneously be both robust and fragile : robust, because risks may be more effectively shared and dispersed across the system ; fragile in that major risks can flow more rapidly through the system. 45 naturally, market participants have been pushing hard for the removal of obstacles to efficient cross - border settlement and barriers to the seamless cross - currency management of liquidity. central banks have been urged to consider accepting foreign collateral or implementing other arrangements to facilitate cross - currency liquidity management. some already do so – the bank of england, for instance, routinely accepts euro - denominated collateral in its operations – and a recent report from the cpss encouraged other central banks to consider accepting foreign collateral, at least in emergency circumstances. the eurosystem has recently begun to explore new options. 46 provision of cross - border collateral arrangements may entail a high degree of coordination and cooperation between central banks internationally, for instance in opening custody and correspondent accounts, and sharing information on local infrastructures and market practices. 47 more generally, strong international cooperation in the sphere of risk assessment and crisis management responses is also clearly important. with increased links between infrastructure providers in different centres and the emergence of new cross13 border infrastructures, greater cooperation is also required in the conduct of oversight : not only in terms of assessment of particular overseen cross - border infrastructures against international standards, but also in identifying potential interdependencies between national infrastructures. while existing cooperative arrangements work well, the model needs to expand and continue to evolve. 6. concluding remarks 48 the resilience of the infrastructure of wholesale payment, clearing and settlement systems to both operational and financial shocks remains a key requirement of financial and monetary stability. but the landscape is changing fast in response to technological change and the financial innovation and globalisation it allows. cross border and global networks are squeezing our national monopolies and commercial banks are playing an increasing role. these

, in formulating and implementing their reform programme, iran has maintained a constructive engagement with the ifis. i am particularly pleased that the bank of england will be involved with an imf - world bank led technical assistance team on financial sector restructuring and supervisory and regulatory frameworks for banks in iran during the coming year. another key element of efforts to strengthen the international financial architecture has been the development and implementation of a range of international standards or codes of good practice. these codes are not meant to lay down strict or inflexible rules. they are designed, however, to promote best practices, while recognising that financial systems are likely to differ across countries and across time. the imf and the world bank, working together with the relevant standard - setting bodies, have been helping economies undertake assessments of their observance of some of these standards. iran is currently working towards the adoption of internationally accepted best practice standards in a number of areas. the central bank is developing a new bank accounting framework, which represents a move towards international accounting standards, while taking account of the special features of islamic finance. the authorities are also developing an action plan for implementing supervision reforms. these developments ought to be good news for prospective investors in iran. they also help illustrate that international best practice standards can be flexible enough to accommodate individual country circumstances. the move to a more market - oriented environment brings with it new challenges. for example, liberalising exchange controls and freeing the exchange rate to market forces brings risks as well as opportunities. a sequenced approach to capital account liberalisation helps mitigate these risks and that is the route iran has pursued. but that is not to say reform has stalled. since mid - 1999, the central bank has taken important steps to improve and simplify the foreign exchange market, including allowing the exchange rate to depreciate to market clearing levels. in march 2000, requirements to surrender non - oil export receipts to the central bank were abolished. the intention now is to introduce a direct, interbank foreign exchange market, and to eliminate an advance import deposit requirement by march 2001. these will be important further steps in increasing iran ’ s exposure to international competition which in turn can contribute to its productive efficiency. exchange rate unification and the partial liberalisation of trade and exchange controls will make greater demands on the effectiveness of monetary policy. for example, monetary expansion may arise from the phased reduction in banks ’ reserve requirements. it will be important for the central bank to develop effective monetary instruments to