klaus liebscher : the importance of the bretton woods institutions for small countries opening address by dr klaus liebscher, governor of the austrian national bank, at the conference on “ 60 years of bretton woods - governance of the international financial system - looking ahead ”, vienna, 21 june 2004. * * * ladies and gentlemen, it is with great pleasure that i may welcome you to the conference on “ 60 years of bretton woods governance of the international financial system - looking ahead ” hosted by the oesterreichische nationalbank. i am equally delighted that we managed to attract so many distinguished speakers from around the globe, who are here in vienna today to discuss various aspects of the governance of the international financial system with us. i would like to express my sincerest gratitude to all these speakers for their contributions in advance. i feel also honored that such a great number of you have accepted our invitation to participate in what promises to be an ideal opportunity to reflect upon the history and future of the bretton woods institutions. during our conference it is supposed that policymakers, investment bankers and academics will discuss the governance of the international financial system, debate about exchange rate issues and explore ways to improve the current crisis prevention and resolution framework. we believe that these three broad themes are central to the debate on the international financial architecture. 1. a brief review of 60 years of bretton woods the 1930s demonstrated that the pursuit of nationalistic beggar - thy - neighbor policies can have dramatic and devastating effects. in order to prevent a repetition of this destructive experience, the bretton woods system consisting of the international monetary fund ( imf ) and the world bank was created in 1944 to govern the post world war ii economic system. this regime was expected to perform three important functions : • a regulatory function by administering the rules governing currency values and convertibility, • a financial function via the supply of supplementary liquidity to members facing balance of payment pressures and • a consultative function by providing a forum for cooperation among governments. i consider the bretton woods system very innovative for four reasons : first, with this system international monetary cooperation was for the first time attempted on a permanent and institutional basis. second, this system respects the principle of national sovereignty while committing members to collective responsibility. third, it provides a mechanism for inter - governmental consultation. and fourth, even though the principle of national sovereignty is respected, voting rights are allocated in proportion to quotas rather than on a one - state, one - vote basis

! ” or, in the words of charlie munger ( of berkshire hathaway ) : “ double entry bookkeeping was a hell of an invention. ” bis central bankers ’ speeches now even more than it did back then, accounting poses a considerable challenge and uses huge resources. the need to provide a true and fair view of ever more complex and sophisticated transactions, to the satisfaction of an ever wider range of stakeholders, has led to rather complex accounting rules nowadays. as sir david tweedie, the former chair of the iasb once said, “ anyone who thinks he understands ias 39, has not read it properly. ” but time will tell if ifrs 9 is capable of doing a better job. the new impairment model, with its paradigm change from allowances based on incurred losses to risk provisions based on expected losses, will have a huge impact on financial reports of banks and their analysis. it can be expected to lead to considerably increased impairments at initial application, and over time to a higher degree of volatility. will ifrs 9 add to the trustworthiness of accounts? the primary aim of ifrs 9 is to establish a significantly improved accounting standard for presenting users of financial statements with information that is relevant, useful, and more comprehensive in assessing the amounts, timing and uncertainty of a firm ’ s cash flows from financial instruments. provisions for bad debts will be larger and maybe more volatile, and adopting the new rules will require a lot of time, effort and money. as of today, i understand, it is unclear if the new accounting rules will strengthen the trustworthiness of accounts because of the complexity of the standard. 3. banking supervision another demanding issue, especially in the context of european integration, and of banking supervision in the banking union, is the variety of legal bases for accounting rules. on the one hand, certain jurisdictions oblige preparers to base their financial statements entirely on ifrs. on the other hand, several member states still rely on their national gaaps, at least for financial statements on solo level. nowadays we find advocates of both approaches. the ones argue that uniform accounting rules are key in an economic union. the others favor the retention of national gaaps which, compared to ifrs, in several ways incorporate a greater degree of prudence. in the context of european supervision, we are currently seeing efforts to overcome this diversity in accounting rules for the purpose of developing a set of key risk indicators for crosssectoral and cross - country