. in parallel to the work of the cebs, the ecb, in cooperation with the bsc, is conducting work aimed to investigate ( i ) the typology of eu banks ’ liquidity stress - testing techniques and contingency funding plans, ( ii ) the performance of stress - tests during the turmoil and ( iii ) the implications of identified shortcomings for counterparties and money markets. this strand of work is currently progressing and is expected to be finalised before the end of 2008. work in the field of liquidity risk already underway before the turmoil although recently work on liquidity risk management has attracted increased attention, this does not mean that it is a new issue in the supervisory agenda. over the past years concerns were voiced over the divergence of prudential requirements for liquidity risk and over structural changes in the banking sector, such as the increasing reliance of more market - based and volatile sources of funding that could constitute contagion channels in the event of a stress. as a result, deliberations and further work in the area of liquidity risk management were underway even before the turmoil, with the aim of ensuring that practices by both the industry and the competent authorities were keeping pace with the rapid developments in the market. in this context, cebs published in august an updated survey of the regulatory frameworks adopted by the member states and the three eea countries. the survey was conducted in light of market developments and included specific information regarding any different treatments provided for specific types of credit institutions and / or investment firms the ecb has also been performing extensive work in the field of liquidity risk management, focusing on three main areas, namely : 1 ) assessing the impact of structural changes in the banking landscape ; 2 ) gauging the extent to which liquidity risk management practices have progressed ; and 3 ) ascertaining the industry ’ s views about eventual barriers to the efficient management of liquidity risk across borders. in october, the ecb, in cooperation with the bsc, published a comprehensive report on the organisation of liquidity risk management for cross - border banking groups in the eu, covering various pertinent issues, namely regulation, obstacles to the pooling of liquidity and cross - border use of collateral and recent market developments. in particular, the report confirmed the trend towards the centralisation of liquidity risk management policies and procedures and de - centralisation of day - to - day liquidity risk management. against this background, the internal corporate governance

specific national problems can only be dealt with through decisions taken jointly, with a euro area perspective. in concrete terms, the problems currently affecting greece, which accounts for 2 % of euro area gdp, are influencing the whole of the area and need to be resolved through tough decisions, not only in athens but also in brussels. bis central bankers ’ speeches the fact is, the people of the different member states have not fully understood that we already have a political union. furthermore, the institutional framework does not provide a decision - making process that is fully compatible with such a political union. let me elaborate. a starting point is the limited awareness of the euro ’ s political dimension. that dimension results from the interconnectedness of the financial markets and the transmission of real, monetary and financial impulses within the area. as a result, governments and citizens throughout the monetary union should not only be concerned about what happens in their respective countries, but also in the other countries, because the latter can have a direct impact on their lives. in other words, it ’ s not sufficient for each member of the union to keep its own house in order, so that its underlying economic, financial and budgetary conditions are consistent with a sustainable membership of the euro area. the others have to do the same. there must thus be a mechanism of mutual monitoring of economic development and policies which ensures that all members comply with the requirements. this demands active participation by the different governments in the supervision of each others ’ policies. this has however not been the case in practice. governments have a mandate from their respective national electorates mainly to take policy decisions for their own countries. there is limited awareness in the domestic political arena that governments are also responsible for monitoring the other members of the euro area, in particular in respect of the stability and growth pact ( sgp ) and ensuring that they abide by it. in concrete terms, if a country records a budget deficit which is found to be excessive in the sense of the sgp, it is certainly that country ’ s responsibility to correct it promptly. however, it is also the responsibility of the other countries, within the procedures established under the sgp ( which also foresee an initiator role for the commission ) to ensure that the correction is fully and vigorously implemented. in other words, if a country does not comply, it should be pressured by the others. and if the others do not do this, they also become responsible for such non - compliance. this was the political