. that siloised model delivers settlement and collateral movements which, though much smoother than they were twenty years ago, are still typically measured in days rather than minutes or hours, and require multiple reconciliations – posing fixed costs, raising settlement and operational risks, tying up collateral, reducing transparency and posing barriers to entry. these segmented structures have not arisen by chance – in many cases they reflect the differing needs of market participants, variations in national practice and regulatory rules, and legacy systems. but they stand in the way of establishing a genuinely efficient international capital market. and they are now under unprecedented pressure from three sources : demand, technology and regulation. the strongest demand pressures come from the largest users of capital markets, who need to find further sharp cost savings if they are to deliver improved return on equity to investors. amongst other things that means : they want settlement that occurs closer to real time ( ie t + 0 ) to minimise settlement and operational risk exposures and economise on collateral usage ; they want to deal with fewer separate intermediaries, systems and data protocols – getting closer to a single seamless experience across sectors, border, currencies and timezones ; and they want to be able to control a single global pool of collateral and assets, with access to a single comprehensive view of their data in real time. an important question is how far this demand for convergence is met through further industry consolidation, and how far it is met through improving the ability of still - separate systems to operate seamlessly with one another ( so - called “ interoperability ” ). a key enabler of this change will be new technology. this may take many forms, including real - time computing, the cloud and messaging standards. but of course discussion at the moment is dominated by the potential of distributed ledger technology, or “ dlt ”. at its most extreme, dlt is quite revolutionary. the “ utopia ” described in euroclear and oliver wyman ’ s bis central bankers ’ speeches recent paper 8 would replace the current cat ’ s cradle of systems with a single, distributed network in which single pools of stock moved seamlessly in real time against central bank money, between and across borders, with only one set of reconciliations to perform, a single global data set available to each user, with integrated reporting and regulatory oversight and spectacular resilience characteristics. the paper envisages that whole classes of intermediary, such as custodians and ccps

the size of the market are difficult to come by. but a survey by the british bankers'association last year found that outstanding notional principal of all credit derivatives had increased more than three times since 1997 to around $ 600 billion. some contacts suggest the market may now be even larger than this. but i think it safe to conclude that it is already large and has been growing quickly. in a wider sense, the development of these markets for the transfer of credit risk is highly desirable. the institution best placed to originate a loan is not necessarily best placed to bear the risk. markets in credit risk allow financial institutions to diversify their exposures across different sectors and geographic regions while maintaining customer relationships. just as important, prices from liquid markets are valuable information, which can help market participants to allocate resources and manage risk more efficiently. if they work well, markets in credit risk transfer have the potential to enhance financial stability and efficiency by ensuring that exposures to shocks are diffused throughout the system, with no single player excessively exposed. unfortunately, however, where there is innovation, there are generally questions and i have three. my first is a concern about lack of transparency. these markets mean that a bank need no longer remain exposed to its main customers but can rapidly take on large exposures to other credits without any new borrowing by the underlying entities. this could make it more difficult for creditors, shareholders and regulators to assess risk. from the point of view of financial stability, the concern is that these instruments might equally be used to concentrate risk as to disperse it. careful monitoring and management of counterparty risk exposures by firms is an important market mechanism to limit this risk. but any individual firm does not know how much total exposure a counterparty has to a particular credit through its transactions with other market participants. these concerns underline the importance of the disclosure elements of the new basel proposals intended to promote market discipline - i have more to say on the basel package in a moment. and if disclosure is an issue at the level of individual firms, you can imagine that in aggregate, for the financial system as a whole, the gaps in the data can be large. it is a major challenge for the authorities to keep pace with financial innovation in the collection of financial statistics. the asian crisis revealed the importance of derivatives exposures in assessing a country's financial position but these were not included in bis statistics on cross - border lending, even though derivatives had been a common feature of financial markets for at