. a study2 by economists from the oecd suggests that a comprehensive package of labour, product, tax and pension reforms could raise gdp per capita in the eu by about 11 % after ten years. for the us, the growth potential of structural reforms is 5 %, less than half compared to the eu. and gains in europe are by no means restricted to the peripheral countries. ranked 111th in the world bank doing business category “ ease of starting a business ”, for instance, germany has ample room for improvement as well. to me, there can be no doubt. for the euro area to take off, we need to follow through on structural reforms. 4. reforms for stability ladies and gentlemen, reforms are needed to remove barriers for investment and growth. but once take - off speed has been reached, it is equally important to ensure that the euro area is resilient enough to withstand turbulences. in this regard, a sound financial system is crucial. what is the yardstick of success with regard to this? to me, it is simple enough : the financial markets have – at least in principle – to work like any other market, and this pertains particularly to market entry, market exit and market power. the problem of too big to fail is one of market exit and market power. if the exit of a single financial institution can jeopardise the whole system, the stability of this system obviously leaves much to be desired. but the market power of the institution in question derived from this phenomenon gives rise to even further risks. if a bank knows it will be bailed out no matter what happens, it will be less diligent when deciding on and monitoring loans. and as we have learned the hard way in the euro area, careless lending can and will eventually come back to haunt you. with regard to the problem of market exit, much has already been achieved in the euro area in the context of the banking union. the single supervisory mechanism ensures supervision at arm ’ s length, guided by the same, strict standards. excessive bank risks should hence be detected earlier. and if push comes to shove and a bank is no longer viable, the single resolution mechanism stipulates that shareholders and creditors are first in line to bear banks ’ losses – and not the taxpayer. however, history has shown that fear of contagion effects is a strong deterrent when it comes to actually resolving an important bank. and whether bailing in creditors would lead to contagion

background paper has been prepared in consultation with the seacen centre. i hope the paper will be a useful document to initiate fruitful discussion on the issue of strategic planning for central banks. in addition, mr gavin bingham, head of international liaison, bank for international settlement, will present an overview of current issues and practices relating to this topic. i am confident that the participants would contribute with their country specific experiences on central bank governance and specifically on their experiences with the formulation and implementation of strategic plans in the respective central banks. the second session will cover selected central bank governance issues and will serve as a follow - up to the seacen - bis seminar on central bank governance conducted in langkawi, malaysia in february 2004. the discussion will specifically focus on aspects of central bank boards as well as lessons and conclusions drawn from the february seminar. ladies and gentlemen, i have no doubt that deliberations of this seminar will be of great benefit to all of us. i also hope your journey to sri lanka will give you a chance to see a little of our country and meet our people. we have arranged for you to see some places of interest in sri lanka. let me conclude by wishing you a productive seminar and pleasant stay in sri lanka. thank you. 2 / 2