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rate regime either for emerging or industrial economies. 27 the right answer for a single country depends on that country ’ s particular circumstances. however, clarifying the criteria for making choices would now seem a particularly ripe area for fruitful analysis in the case of emerging market economies. clearly, some important mistakes have recently been made in this area. and the wide variety of recommendations being made to different countries by academics and others argues for an assessment of the criteria on which those recommendations are being made. c. improving international banking regulation and supervision regulation and supervision are not the same. the former has to do with setting out rules, while the latter has to do with ensuring that the behaviour of financial institutions is overseen and that the rules are followed. we must distinguish as well between principles and practices in both areas. for example, it has been relatively easy28 to lay out certain core principles of banking supervision, but the next stage of ensuring their global implementation will be much more difficult and time - consuming. in light of some of the banking problems which emerged in mexico and more recently in asia, let us consider some recent advances in the area of international banking regulation and supervision. perhaps the best - known of all the international banking regulations are the basle capital adequacy ratios. these ratios are now being re - examined by the bcbs with a view to having a consultative document in the public domain in april 1999. while developments ( such as securitisation and advances in credit risk modelling practices ) in industrial countries gave the main impetus for this review, the re - examination was also motivated by the mexican and asian developments. in particular, it has been pointed out by some analysts that the preferential treatment of bank loans made to counterparties in countries which are members of maintaining sustainable emerging market exchange rate regimes ”. martin wolf in the financial times has also drawn attention to this puzzle of omission. one reason why countries may currently hesitate to adopt floating is that they confuse what might happen under such a voluntary regime with what did happen ( effectively an uncontrollable depreciation ) when countries were forced off their previous peg. these issues bring us back to the literature on optimal currency areas pioneered by robert mundell. many of the pertinent criteria for joining such an area ( a truly immutable fix ) were revisited in the period leading up to the introduction of the euro. the operative word here is “ relatively ” since the background documents on which the core principles were based took over