lars nyberg : towards a new european supervisory structure speech by mr lars nyberg, deputy governor of the sveriges riksbank, at sifma's annual meeting, new york, 27 october 2009. * * * ladies and gentlemen let me start by saying that i consider it a great honour to have been invited to speak to you today. we work in different parts of the world, but i think that the crisis that we are now struggling to get out of has shown, for good and bad, that the financial system has brought us closer together than ever before. over the course of last year, there is one sentence that has really burnt into my brain. it was delivered by mervyn king, the governor of the bank of england, who has a great talent for one - liners. he concluded on one occasion, somewhat disillusioned after having dealt with the failure of a number of cross - border institutions, that “ global banks are international in life but national in death ”. and indeed he is right. we have banks and other financial institutions that work all across the globe. but when they get into trouble the instruments for safeguarding financial stability essentially remain fragmented along national borders. this geographical mismatch is something that the regulators will have to deal with, one way or the other. and to put it bluntly, from a policy perspective it basically boils down to a choice between two paths. on the one hand we can choose a path towards fully - integrated international regulatory and supervisory structures, in order to achieve a better match with the global format of the financial system. on the other hand, we can choose a path towards shrinking the financial system back inside national borders, within the perimeters of current regulatory and supervisory arrangements. obviously, reality will not be as black and white as to make a simple choice between these two paths possible. future regulatory reform will probably take some kind of middle road. but if someone asked me for directions my answer would be clear. the benefits of financial globalisation are too great for us to afford to close national borders and to roll back financial integration. a new european supervisory structure – the de larosiere proposals as you all know, the european union chose its path already some time ago. based on the belief that integrated markets contribute to economic growth ( and also to other important policy objectives ) the european union has established a legal and institutional framework for the supervision and regulation of financial markets. however, even though we have come a

step backwards. i do of course realise that it is unrealistic to ask for the creation of an international institution with supranational powers to deal with distressed cross - border banks. so, in the absence of a common global regime the best we can do is to try to develop a common international approach to crisis management and resolution. if we cannot do it as one, at least we need to make sure that we can do it similarly and in a coordinated fashion. so we need to embark on an even bolder agenda than the present supervisory reforms. here, we may draw some inspiration from the last century. after the war we created the imf to provide some basic rules for the monetary system, recognising that the system is interlinked and that problems in one country may also create problems in others. in the 1980s we agreed on the basle accord with joint supervisory rules for the internationallyactive banks. recognising now that supervisory convergence hinges on agreement on crisis management and resolution, i think that it is time to address this issue in a serious way. i see this as a necessary step for europe, given our single market. but in a broader context too, it will be a natural step towards strengthening the global financial system. thank you.