##tement to characterise the past two centuries of british finance as being not “ primarily national ”. after all, for much of that period london was the centre of global finance as well as of international economic relations generally. having reinvented itself in the 1960s, and in the 1980s, and perhaps again today, london ’ s role in global finance has outlived – indeed outgrown – its imperial origins and remains a key node in a multipolar system. but that is a system which has been shaken by the evolving crisis from which it will emerge in a reconfigured form. influencing the design of this reconfiguration through domestic, regional european, and wider international governance structures is a major preoccupation of financial policymakers : what will the role of london be in the reconfigured system, how will ireland fare? these are key issues preoccupying you and me respectively, and they are not unrelated. perhaps the most contested part of the on - going and prospective reconfiguration relates to the role of governments in the financial systems of the future. and, in the european context, that includes the question : which governments or governmental agencies for which roles? what should be at the national level, what at the regional – in our case european – and what to the global level? let me take some examples of issues that have arisen and have been dealt with in a variety of ways to illustrate the import of these questions. banks, sovereigns and financial de - integration for many years now, a mantra of most financial development economists has been to emphasise the failures of government involvement in the running of banks. country after country suffered severe set - backs when the degree to which the lending policies of government - controlled banks were exposed – in a downturn – as having been largely politically - motivated and more like grants than loans. the recent crisis has also entangled banks and governments again, but in a different way ( albeit one which was also seen in other developing countries in the past ), namely the socialisation of private banking losses destabilizing the finances of the state. even where the state did not pick up the tab for the bank debts, namely iceland, the consequences for the state of the losses have been severe. and i think it is fair to say that the icelandic events have also shaken the underpinnings of the european single banking market. the idea of cross - border branch banking has been undermine

##d by regulatory responses in some european union countries no longer prepared to accept the validity of the single passport and requiring foreign - owned banks who wish to operate across borders to create, for example, a local subsidiary. regulatory ring - fencing of local bank liquidity has also been observed – clearly contrary to the spirit of the single banking market. what this seems to come down to is a loss of confidence in the idea that foreign regulators could be relied upon and, perhaps also, a perceived lack of creditworthiness of some sovereigns even within europe. the latter may be seen as not altogether unjustified, given the recent restructuring of greek sovereign debt. still, it is noteworthy that banking debt has been repaid across europe despite the pressures that have been placed on sovereigns. in this process, there has been a sharp reduction in cross - border banking exposures in the market. thus, both in regulation and in market behaviour, the single banking market has suffered a notable retreat. restructuring and downsizing of european banks has had a similar effect, some of it ironically the consequence if pro - competition measures taken by the european commission. by the early 2000s, the irish banks had moved from their historic position as exporters of funds to the rest of the world to champion importers of funds to be recycled into finance for mortgages and for property development in the irish world - beating property and construction bubble. although this boom coincided with ireland ’ s euro membership, i have argued elsewhere that the link was a tenuous one. one indication : the fact that the british banking connection held up well in this period also : the two biggest uk banks were among those bis central bankers ’ speeches leading the headlong charge for property lending. now they, and the local banks ( and government ), are licking their wounds in terms of heavy actual and prospective loan - loss charges. financial integration generally – not just the euro – fuelled the boom to dizzying heights from which the fall has been painful. by now, the irish banks, faced with a “ sudden stop ”, have repaid vast borrowings from the globalised financial system largely using central bank funds to do so – though, also using some of the troika funds via the recapitalisation of the banks at mid - 2012. financial integration intermediated through official channels has, for the moment, replaced international market integration. and the same replacement is also happening across the euro area. continental banks in several of the largest countries have switched to central