##s and asset bubbles. to the extent that the us financial system did not generate enough “ pure ” safe assets, this created an incentive for the financial sector to manufacture such assets through the securitization of lower quality loans, but at the cost of greatly increased ( if hidden ) financial fragility. this fragility became apparent when the whole architecture of securitization collapsed under the weight of excessive leverage and maturity transformation. the point here is that internal and external financial stability are two sides of the same coin. domestic financial imperfections, on the one hand and distortions in international capital flows, on the other, interact with each other to create and amplify imbalances. ultimately, financial instability is a product of this through this interaction. international financial linkages therefore can be a source of increased fragility for many national economies, including the largest ones. international financial stability : does it matter? international financial instability manifests itself through various channels. assessing its impact is difficult. opinions may differ as to whether volatility in capital flows and exchange rates is excessive or, rather, a pure reflection of variations in fundamentals. by the same token, movements in asset or commodity prices can be seen to reflect the balance of supply and demand forces, or, alternatively, to be the product of speculative activity. looking at the behaviour of most countries during the crisis, however, it is very apparent that they felt threatened by the instability of capital flows and, accordingly, sought to protect themselves from its consequences. the provision of international liquidity, in particular, has been severely disrupted during the crisis. emerging ( and some industrialised ) countries have suffered from acute dollar liquidity shortages which had to be remedied, inter alia, through a network of currency swaps between central banks. the crisis is a powerful reminder that liquidity – both domestic and international ‐ can never be taken for granted. in today ’ s world, most international liquidity is privately provided and represented by claims on private institutions. interbank markets play a crucial role in this process. the more capital markets become integrated at the short end, the more international liquidity is provided by the private sector. the importance of global private liquidity conditions was apparent in the period which followed lehman ’ s failure. output and trade fell across the world with astonishing simultaneity. it seemed natural to assume, at the time, that “ traditional ” forms of contagion – through goods or capital markets

advantages offered by the paris financial center as a market and a services provider? the recent launch of the euro has given a big boost to our financial center and leveraged our structural strengths : concentration of headquarters of big companies, innovative entrepreneurial development in fund management ( fixed - income and sophisticated guarantee funds ) and strong knowledge of mathematical finance, that is the base for french leadership in derivatives and riskbased models. innovation and expertise had and still have for the future a very positive impact on both the bond and equity markets. consequently french investment banks are very well ranked in european activities. paris has taken a major position in the recent developments of the euro - denominated bond market : the french government bond market is today the most liquid in the world after the us treasury market, with an outstanding of € 900 billion, and has a strong innovative strategy : let ’ s mention the launch of a range of index - linked products to european and french inflation, or the introduction of a 50 - year oat bond, which represents the new frontier of the euro fixed - income market. the french corporate bond market is the largest in europe, with an outstanding of €250 bn, compared to €180 bn in london and €85 bn in frankfurt. most recently, we have seen strong growth of structured and synthetic products. the new legislation concerning the french covered bond market boosts this market compartment, which represents today an outstanding of €160bn. on the equity side, euronext has been ahead of london and frankfurt in terms of transactions since 2006. the new alliance between nyse and euronext creates the world ’ s largest exchange in terms of market capitalisation ( €25 trillion ), the world ’ s largest liquidity pool, with a daily average trading volume of €78 billion, & the world ’ s premier listings venue, with the presence of 80 of the top 100 companies listed world - wide, etc. this alliance marks a new era in the global consolidation of financial markets, with its stocks traded continuously for 13 hours a day on two continents and offering corporate issuers and international investors the opportunity to deal in two of the world's major currencies, the us dollar and the euro. french banks today have a leading position in equity derivatives markets, with more than 25 % of the worldwide market. new opportunities have arisen in this sector, with the development of the asian instruments, which are still at an early stage, as well as products related to environmental