are generally aware of the differences between banks and non - banks, and of the fact that non - banks may be more risky than banks. however, i would be the first to acknowledge that such an approach would not necessarily be the best for all other countries. in many countries, retail depositors typically use non - bank financial institutions rather than banks and it may therefore be important that those institutions are licensed and supervised. similarly, in some countries where there are perhaps thousands of licensed financial institutions and a very large population – and generous deposit insurance or a strong implicit government guarantee of bank deposits – it may well be desirable for the supervisor to check the bona fides of bank management. in new zealand, with its relatively small population and absence of deposit insurance, we are satisfied that the public is well able to make its own assessment of the quality of bank management and has an incentive to do so, and in these circumstances there is no need for the supervisor to take on this role. thus, while we strongly support the introduction of international standards in principle, we would not like to see a one - size - fits - all or checklist, tick - the - boxes, approach. international standards need to be interpreted with an appropriate degree of flexibility in order to adequately cater for the individual circumstances of each country. further, when devising supervisory policies we need to bear in mind not only the individual circumstances of our own countries but also the need to ensure that policies harness market forces to the extent possible, rather than undermine them. as alan greenspan said in 1997 : “ as financial transactions become increasingly rapid and complex, i believe we have no choice but to harness market forces, as best we can, to reinforce our supervisory objectives. the appeal of market - led discipline lies not only in its cost effectiveness and flexibility but also in its limited intrusiveness and its greater adaptability to changing financial environments. measures to enhance market discipline involve providing private investors the incentives and the means to reward good bank performance and penalise poor performance. expanded risk management disclosures by financial institutions is a significant step in this direction. ” 1 indeed, mr greenspan made the same point again exactly one month ago, when addressing the american bankers association in phoenix, arizona. in that speech he said : “ a one - size - fits - all approach to regulation and supervision is inefficient and, frankly, untenable in a world in which banks vary dramatically in terms of size, business mix, and appetite

banking supervision has been instrumental in producing a number of important international standards on the supervision of banks, including the capital accord and minimum standards governing the supervision of banks ’ cross - border establishments. similarly, other supervisors such as iosco and the international association of insurance supervisors have pursued co - operation in their areas of responsibility. and in the early 1990s, in recognition of the emergence and growth of financial conglomerates, banking, securities and insurance supervisors from g10 countries began to work together to identify the problems that conglomerates can cause, and to consider ways to overcome them. the mexican crisis in 1995, in particular, and the widespread incidence and high cost of banking problems recently in this region have prompted calls for concerted international action to promote the soundness of financial systems. these calls have strengthened over the last couple of years, with the g7 countries calling for the adoption of strong prudential standards in emerging countries and encouraging the international financial institutions to increase their efforts to promote effective supervisory structures in those countries. the basel committee has been at the forefront of this effort with the release of the core principles. the imf and the world bank are also involved. the imf is making evaluation of financial supervision and regulation part of its annual country reviews, and the world bank is emphasising the strengthening of financial infrastructure as an important part of its structural assistance programmes. these initiatives have many positive aspects. international harmonisation and co - operation are very important in what is rapidly becoming a “ borderless ” global financial system. also, it is important that the risks that supervisors should take into account in their supervision are identified, and that benchmarks are established whereby countries can measure their progress in establishing appropriate supervisory regimes. as supervisors, we can derive a great deal of benefit from such an approach. bank customers and banks themselves also benefit from the international comparability made possible by the use of common measurement and disclosure frameworks. nevertheless, i believe it is important not to assume that supervisory arrangements should be, or can be, the same in every country. in my view, they must be tailored to the individual circumstances of each country. what is appropriate for a small country like new zealand may be totally inappropriate for a large country like the united states, and vice versa. to give just one example, non - bank financial institutions need not be licensed or supervised in order to take deposits in new zealand. here that does not cause any problems because the non - bank sector is tiny relative to the bank sector, and people