you what are, in my judgment, the study's key findings and policy implications. these key findings cover thirteen nations ( the g - 10 plus australia and spain ). the study documents high levels of merger and acquisition activity among financial firms during the 1990s and an increasing pace of consolidation, including a noticeable acceleration in the last three years of the decade. most of the consolidation has been within countries and within segments of the financial sector. cross - border and cross - sector consolidations have been less frequent. our research shows that financial consolidation substantially decreased the number of banking firms during the 1990s in almost every country studied and that national concentration of the banking industry tended to increase. financial consolidation has helped to create a significant number of large and, in some cases, increasingly complex, financial institutions. these firms increasingly operate across national borders and are subject to a wide range of regulatory regimes. as for the causes of all this merger and acquisition activity, overall, it appears that the most important forces encouraging financial consolidation are globalization of financial and nonfinancial markets, financial deregulation, improvements in information technology, and increased shareholder pressure for financial performance. because these forces are likely to continue, financial consolidation is likely to continue as well, although the pace may be interrupted by fluctuations in the macroeconomic cycle and other factors. the study considered possible future scenarios but concluded that the likelihood of specific future developments is impossible to assess with confidence. my own guess is that various patterns will emerge. globally active universal financial service providers will continue to develop. we should also see the further development of firms specialized in the production of particular components of financial services or in the distribution to end - users of products obtained from specialized providers – providers that may exist within or outside the traditional financial services industry. i fully expect a large number of efficient and profitable small and medium - sized financial institutions to remain important players in the united states. i would guess this will also be the case in many other nations. in addition, the uncertainties of successful post - merger integration may well favor more use of looser forms of consolidation, such as joint ventures and strategic alliances. the data that we collected suggested a number of conclusions. for example, financial consolidation has increased the concentration of payment and settlement flows among fewer parties. the risk implications of consolidation in payment and settlement systems deserve close monitoring. in addition, the study found that although consolidation has some potential to improve the operating efficiency of the combined financial institutions, and has done so in some cases, the overall

in many cases, new entry has helped to offset the effects of consolidation on local market concentration. in addition to acquiring other depository institutions, banks and thrifts have engaged, to a limited extent, in cross - sector acquisitions. in 1999, the gramm - leach - bliley act relaxed many of the restrictions on the financial activities of banking organizations by permitting the formation of financial holding companies - firms that could engage in a wide variety of financial activities, including commercial banking, securities underwriting, and insurance. contrary to many observers'expectations, the ensuing cross - sector consolidation activity has been modest so far. indeed, the largest cross - sector banking deal, the combination of travelers and citicorp, took place in 1998, before gramm - leach - bliley was passed. check truncation act now i would like to take a few minutes to talk about some of our efforts to improve the efficiency of the u. s. payments system, which is a subject of concern for all banks. you may know that i co - chair the payments system development committee with cathy minehan, president of the federal reserve bank of boston. the psdc was formed in mid - 1999 to ( 1 ) identify strategies for enhancing the long - term efficiency of the retail payment systems, ( 2 ) identify barriers to innovation and work to eliminate or reduce those barriers where desirable or appropriate, ( 3 ) monitor developments in payments markets, and ( 4 ) conduct workshops and forums that encourage focused discussions on payments system improvements with the private sector. it is my view that we need to approach payment system innovations with an open mind and a willingness to learn. in a dynamic economy, markets need to play a key role in guiding the development of infrastructure. this means that innovation and competition will be central to the future development of the payments system – as they are in other areas of the economy. policymakers for their part should strive to remove barriers to innovations that do not conflict with important public policies. they should resist calls to limit competition, but rather should take every opportunity to foster competition. similarly, public policy should exercise restraint and resist calls for premature or short - sighted regulation. even well - intentioned actions may create perverse outcomes, may not effectively address longer - term public policy concerns, or may short - circuit creative innovations. on the other hand, public policy will have to confront genuine and significant problems when these become clear and are not self - correcting. now let me tell you about