. placing greater weight on the long - term sustainability of public finances sounds reasonable ; however, this provision should not be used as a “ back door ” for introducing all kinds of exceptions. discriminating between good and bad types of expenditure is of no help either. i have serious misgivings about any endeavours to loosen the obligation to trim excessive deficits in a speedy manner and about tolerating excessive deficits in periods of economic stagnation or low growth. overall, the debate on reforming the stability and growth pact has the air of reshaping the rules to fit current fiscal practice - instead of reshaping fiscal practice to fit the pre - agreed rules. basically, the proposals now under discussion amount to substituting discretion for rules. the implications of this paradigm shift must be borne in mind : heightened complexity, reduced transparency, and discarding the principle of equal treatment. abandoning rules in favour of discretion would represent a major step backwards. emu was once meant to be placed on a solid institutional foundation instilling credibility. rewriting the pact as envisaged would deal another blow to the credibility of the fiscal framework of the monetary union. from the viewpoint of a monetary policymaker committed to stability, the envisaged change to the nature of the stability and growth pact would not yield any major benefits. it could, however, come at a great cost. 4. fiscal policy and structural reforms the growth policies agreed on in the lisbon agenda are, amongst other things : • the completion of the internal market, • stimulating competition and deregulating the product markets, • reforms improving flexibility in the labour market, • generating a climate conducive to entrepreneurial activity, to research and development. i very much support this agenda. i do, however, not support proposals which, with reference to the lisbon agenda, suggest that expenditure related to growth policies should be disregarded when calculating the deficit. in my, view, using the lisbon agenda as an excuse for weakening the stability and growth pact amounts to upending conventional economic wisdom. the correlation between debt and deficits, on the one hand, and economic growth, on the other, is negative. never in economic history have spendthrift policies produced sustainable growth. the opposite is true, and all the more so as all european countries have to brace themselves for sharply rising fiscal costs resulting from the pending demographic shift in an ageing society. loosening budgetary discipline is no viable option for promoting economic growth. on the

their structure. in short, the structure of large financial firms has become much more complex and varied over time and is increasingly reflecting the business strategy of the organization. banking supervision at the federal reserve has long taken a consolidated view of risk management and internal controls, a focus that the 1999 passage of the gramm - leach - bliley act ( glba ) reinforced. under glba, the federal reserve, as umbrella supervisor of banking organizations, has a special responsibility to determine whether bank holding companies are operated in a safe and sound manner so that their financial condition does not threaten the viability of affiliated depository institutions. consolidated oversight of bank holding companies, and in particular the subset of bank holding companies that have elected financial holding company status in order to engage in a broader range of activities, is important because the risks associated with those activities can transcend legal entities and business lines. that is, risks in one entity can have an impact on another entity or functional area - and ultimately on the enterprise as a whole. supervisory oversight at the bank holding company level is particularly critical because public disclosure and market discipline are exerted largely at the consolidated level. therefore, the regulatory constraints imposed at the bank holding company level can be the most binding on the organization. financial institution supervision in the united states generally is determined by type of charter - state or federal - and federal reserve membership. the dual banking system of state and federal banks has encouraged innovation and is an important contributor to the strength and flexibility of the u. s. financial system. however, supervision by charter can create an uneven playing field for competitors that offer similar services but are subject to different regulatory requirements. supervision by function can ensure that competitors have a similar regulatory environment. but functional supervision has a weakness common to entity supervision. that is, business processes are often designed without regard to management organization or legal entity. this is becoming more common as technology is used to integrate varied activities and internal control systems are used to aggregate information across business lines. thus, a supervisor that focuses on one part of the business process may not understand how activities earlier or later in the process flow may affect internal controls and risk exposures. further, as we have seen in some notable public enforcement actions taken in the last couple of years, supervision of only a portion of the organization can leave gaps in risk coverage. organizations that are run by business line, including risk management and compliance, can miss inherent conflicts of interest between lines of business. thus, individuals can be motivated to