comments on related challenges of the basel committee. at a more global level, we face the same consistency issue in the implementation of basel ii, and as i said, in this case, europe can lead this process, we in europe have more instruments to do it, and the example can be very helpful for the basel process. this is the first and most important challenge of the basel committee in the next few years. as part of this process we will adhere to the published schedule for our fifth quantitative impact study. and i believe that we already have the tools at our disposal to deal with any issues that arise from the qis5 exercise, or that arise during this period of implementation. to be sure, a key element is not to add further details to basel ii, but rather to focus on achieving a quality implementation of the new framework. therefore, i do not anticipate any significant change to the framework during the period bankers and regulators are tackling initial implementation challenges. but the main challenge is the cross border home host cooperation. on this point i would not underestimate the work and efforts that supervisors are devoting to this issue. one final related point. the staggered implementation, specially the timetable differences with eeuu raises transitional crossborder issues that will need to be managed through greater collaboration between the eu and us supervisors, but i can assure you that both sides are even more committed to this than before, and that our efforts will be redoubled in this respect. ultimately, i hope that this commitment and effort will promote even more effective implementation. a second related challenge is to enhance the cooperation with non - g10 supervisors. this has been one of the committee ’ s priorities and many significant steps have been taken and will be taken to improve the ownership of the standards and inclusiveness of the processes. for example, the committee has a long - standing working group that includes representatives from sixteen non - member countries, and we have increased our interaction with this working group. this past july, the committee met in joint session with this working group in krakow, poland to discuss, among other things, basel ii implementation issues. in addition, we encouraged non - g10 supervisory participation on working groups that are addressing issues related to validation and operational risk. i believe that this dialogue will, over time, foster greater consistency among committee and non - committee members. the committee is therefore committed to heightening this dialogue and will consider further ways to promote consistency. i noticed a quote on the cover

requirements for national schemes, the current level of harmonisation is low, with different levels of protection and different structures in place across the eu. this is not only inefficient but may hinder further integration. as many of you will already be aware, the european commission is currently undertaking a wide - ranging review of deposit insurance arrangements, and i would encourage it to be ambitious in this respect. the second relates to the work being carried out by the commission with the aim of ensuring that eu financial services legislation and supervisory practices do not pose barriers to cross - border mergers and acquisitions. consolidation processes should be market - driven phenomena that respond to market needs, such as economies of scale, it synergies, the benefits of diversification, access to a larger client base, etc. i think that supervisors do have a crucial but limited role to play in fulfilling their responsibility to ensure that banks are not taken over by shareholders that are not suitable on prudential grounds. but this is as far as we should go. the supervisory framework let me now turn to the supervisory framework. i believe that we need to think in terms of a european system of banking supervision. i am not talking about a single european supervisory authority. i don ’ t think the time has come for this, either at a conceptual or practical level. but rather, i think that we need to develop the existing institutional system for european banking supervision in order to ensure that all of the possibilities for co - operation and convergence are fully taken advantage of. the main policy objective at this stage should be to enhance cross - border supervisory co - operation in order for supervisory action to be perceived as unified. this system should be built on four levels. at the first level, we have the competent supervisor of each banking institution ( whether this is the home or host supervisor in the context of the group ), which will have to fulfil its responsibilities and accountabilities, on the basis of the powers and obligations it has been given by the national parliament and legislators. the second level consists of bilateral co - operation between the supervisors of internationally active institutions. this has long been the bedrock of effective supervision in the context of increasing internationalisation, and will continue to be essential in the future. multilateral co - operation forms the basis of the third level. this is an aspect that has become progressively more significant in recent times, and which will grow in importance in the coming years. both bilateral and multilateral arrangements will be increasingly necessary in