financial openness, one can see a remarkable eightfold increase over the last 25 years to now more than 130 percent. as far as global capital flows are concerned, it is noteworthy that the composition of these flows has changed significantly over recent years. while foreign direct investment and international equity flows were particularly strong in the late 1990s, international transactions in more liquid assets have risen in recent years, making up most of the increase in global capital movements. international risk - sharing and the transfer of net savings across countries are important features of this process of financial globalisation. another salient characteristic of today ’ s global economy is the emergence of new important actors on the global economic stage. emerging market economies are gaining a larger share in the global economy as their product and factor markets become more closely integrated with the rest of the world. the integration of these countries and their participation in international supply chains has clearly affected global demand and supply of a broad range of goods and factors. with regard to capital flows, according to institute of international finance data, emerging market economies in 2006, like in the year before, are estimated to have attracted more than usd 500 billion in net private capital flows. net direct investment has been, and is projected to continue to be, a large component of these flows. moreover, what bears emphasis is that emerging market economies in most recent years have been providing the rest of the world with net resources in the form of current account surpluses. the drivers of these mainly official flows are in particular limited domestic absorptive capacities and underdeveloped domestic financial systems. in sum, these significant global economic developments are structural and systemic in nature and have led to tectonic changes in the global economic landscape. they have brought about substantial benefits and entail inevitable challenges to both policymakers and market participants. the benefits associated with the broadening and deepening of global economic interlinkages are manifold. the ever closer integration into the global economy of a rising number of countries has offered new possibilities to finance investment and consumption and to diversify and share risks globally. also, the scrutiny by international investors serves as a disciplining device, which enhances the quality of domestic economic policies and thus contributes to improved economic fundamentals. moreover, the exchange of goods and services, of capital and labour has facilitated the transfer of know - how and technology. all of these effects have led to an increase in global economic prosperity and rising living standards in many countries around the globe. while these benefits are indeed substantial, there

of separation of the monetary and supervisory function. the important role given to the supervisory board vis - a - vis the governing council, already referred to, is one of the various safeguards ensuring a clear separation between the monetary and supervisory function of the ecb. additionally, deliberations of the governing council on supervisory matters will be strictly separated, including separated agendas and meetings. the ecb fully subscribes to the need for a clear separation between its monetary and supervisory function and the provisions to this end mentioned in the proposed legislation. but let me stress that separation does not mean isolation. the conferral of supervisory tasks to a central bank is in line with the responsibilities of many other central banks that combine these two functions. in fact, the crisis has only strengthened the trend of central banks acquiring supervisory responsibilities and there are many good reasons for conferring supervisory powers to the central bank. a first argument is that a stable financial system is a necessity for the smooth conduct of monetary policy and as such a major concern of any central bank. second, there are information synergies between the oversight of payment systems and the supervision of banks. the ecb is not only responsible for the oversight of all large - value payment systems operating in the euro area, but also the owner of the target2 system, the largest of such systems. third, central banks have a lot of expertise on the financial sector. the constant monitoring of the different market segments in order to assess the transmission of monetary policy contributes to their understanding of the financial sector and to act quickly in situations of financial stress. fourth, central banks will be able to achieve a better management of its counterparties´ creditworthiness in monetary policy operations. fifth, central banks are particularly prepared to manage macroprudential policies as they have a deep knowledge of the macroeconomic and financial cycles and monetary policy shares the same concerns with macroprudential policy, namely the stabilisation of the cycle to ensure price stability in the medium and long term. this provides the justification for the fact that in europe and around bis central bankers ’ speeches the world central banks are given macroprudential authority even when they not have micro supervisory powers. in fact, the usual arguments to separate monetary policy from supervision do not apply to macroprudential policy. in particular, the potential conflicts, the sensitivity and reputation risks resulting from decisions about individual institutions do not arise in what regards macroprudential policies. it is then to be expected that the