an interest rate policy geared to the needs of the swiss economy. membership would also spell the end of the interest rate advantage with respect to the euro area, which still stands at one and a half to two percentage points. this would entail the loss for the swiss economy of an important competitive advantage. if there are grounds for hoping that an enlarged eu will lead to greater stability and prosperity on the european continent, it is also conceivable that a larger market will open new opportunities for switzerland. once the bilateral agreements have been extended to cover the new member countries, our economic relations with the enlarged eu will be regulated by the same network of bilateral treaties, as is the case with the current eu. the swiss economy will thus enjoy easier access to a greatly expanded market totalling 450 million people. however, eu enlargement also represents a challenge for switzerland. a larger union needs to work out its joint position in lengthy internal consultation and decision - making procedures. it could thus become increasingly difficult for us to defend our own interests. enlargement is therefore very likely to influence our relationship with the eu. let me now move to one of the key features of our economy : our financial sector, which currently also faces some major challenges. 4. switzerland as a european financial centre since the beginning of the last century the swiss financial sector has been a mainstay of our economy. it accounts for just under 6 % of total employment, but currently generates over 10 % of the country ’ s gdp. relatively speaking, therefore, it is more than twice as big as the german or french financial sectors, for example. switzerland ’ s globally active big banks and insurance groups are also major international competitors in most market segments. the two big banks are among the world ’ s ten largest banks. in terms of value added by the financial sector, switzerland occupies fourth place behind new york, london and paris, but is ahead of frankfurt. switzerland plays a leading role in banking, above all, in asset management. almost four trillion francs worth of assets are managed in switzerland. this accounts for around one - third of the world ’ s portfolios of cross - border investments. over the last 10 years, our financial institutions have also greatly expanded their activities abroad on a global basis. in 2000 the value of their foreign investments amounted to some 54 billion swiss francs, which is equivalent to around 14 % of total swiss investments abroad. switzerland is also a magnet for foreign banks. nearly one in every two banks in switzerland

have established networking of their atms with the interconnectivity of switches. better outreach offered by atms will enhance the customer base and offer more alternatives and choices to customers. further development on e - banking and internet banking will open up new avenues like on - line banking. among others, the relatively smaller size banks will be able to compete with the large banks and retain their market presence by using technology more effectively. technology tends to have a high degree of obsolescence. thus, the financial institutions will have to invest heavily in the development of their it systems, which might initially burden their resources. for this purpose, the financial industry will have to optimize its resources for technology applications. the immediate solution might lie in sharing of facilities. banks in pakistan are already cooperating extensively in using atms services. the future areas of cooperation might involve payment and settlement, back - office processing, data warehousing etc. at the same time, financial institutions will also have to raise adequate safeguards to deal with the associated operational risks. this would invite special focus of their management in the future. universal banking universal banking has gained sharp acceptance as traditional boundaries of financial service provision have become blurred. in addition to their conventional commercial banking services, banks have withdrawn from specialization to offering a broad menu of services. this presents the banks with opportunities as well as challenges and requires constant development of their expertise in the new areas of their operations. the idea of universal banking, which is still evolving in pakistan, is likely to galvanize the non - banking financial sector in developing competitive products and use modern technology to secure themselves against banks making inroads into their traditional areas of operations. this is likely to give further impetus to competition in the financial sector for the provision of quality financial services. at the same time this might catalyze mergers among banks and non - bank financial institutions for their mutual survival. this trend may lead logically to promoting the concept of a financial super market chain, making available all types of credit and non - fund facilities under one roof or in terms of specialized subsidiaries under one over - arching organization. consolidated accounting and supervisory techniques would have to evolve and appropriate firewalls built to address the risks underlying such large organizations and banking conglomerates. risk management the above - mentioned forces of change have significantly increased the importance of strengthening the risk - management practices of the financial system. with the proliferation of new techniques and financial institutions venturing into new areas, a whole range of market related