, what reforms seem necessary to stimulate financial sector development and, secondly, how can central banks secure financial stability in a globalised economy? these questions are all the more relevant, given the emergence of international financial centres in beirut, dubai, qatar and bahrain, among others. the increasing importance of cross - border financial flows means shocks originating in one financial market can quickly be propagated to other markets. to avoid contagion when financial instability occurs, national financial systems need to be adapted so as to be able to contain shocks originating in their own jurisdictions, while also being capable to weather external shocks. the imf - supported conference on financial sector reforms and prospects for financial integration in the maghreb countries in morocco in december 2006 concluded that over the last decade, all countries concerned have implemented reforms to modernise their financial sectors, allowing financial systems to develop and grow more resilient and sophisticated. however, according to the conclusions of that meeting, reform efforts should continue in the following areas : • firstly strengthening banking system soundness by reducing banks ’ nonperforming loan portfolios, ensuring adequate loan classification and provisioning, and adhering fully to internationally accepted prudential rules. • secondly enhancing competition in the banking systems by ensuring a level playing field for all banks, including through the restructuring of public banks and privatization, if warranted. • thirdly deepening financial markets through strengthening the regulation and supervision of securities markets, broadening the investor base, and improving transparency. • fourthly strengthening financial sector oversight by allowing greater autonomy to supervisory agencies and providing them with more resources to hire, train, and retain qualified staff. • fifthly bringing financial infrastructure in line with international best practice by establishing commercial courts, strengthening corporate governance, and fostering a sound credit culture. regional integration can reinforce the progress made in financial sector reform. useful lessons on regional financial integration can be learned from similar endeavours in other parts of the world. these experiences, particularly those of the european union, suggest adopting a gradual approach and underscore the importance of sound macroeconomic frameworks and healthy domestic financial systems for successful financial integration. i now turn to the second issue : the role of central banks in securing financial stability in a globalised economy. the objective of financial stability requires action on three fronts : prevention, surveillance and crisis management. concerning prevention, national and international authorities have concentrated on defining and working - out rules and standards aimed at improving the functioning of institutions, markets and infrastructures that are essential for

any war between france and germany becomes not merely unthinkable, but materially impossible ". so, the memory of the two wars made for a very strong political will to further european integration. at its heart was a process of franco - german reconciliation and cooperation. so, although the start of the european integration process dates back to the years after world war ii, the first official attempt to set up an economic and monetary union was not made until 1970, when the so - called werner report ( commissioned by the european council ) outlined the main features of emu and the road to its achievement. however, due to strong turmoil in the international economy ( the collapse of the bretton woods system and the oil crisis ) and the absence of both policy coordination and political will, this first attempt at monetary union proved unsuccessful. it was not until the end of the 1970s that the monetary integration process resumed, more specifically with the establishment of the european monetary system. despite considerable difficulties, especially during the first years, the ems contributed to a broadening of the " acquis communautaire ", on the basis of which a genuine project for monetary union could be set in motion. this new initiative was based on the " delors report ", again commissioned by the european council, which came up with a blueprint for an economic and monetary union in europe and specified the successive stages through which it would have to go. further negotiations resulted in the treaty of maastricht, which, despite the serious problems in the ems during the years 1992 - 93, finally led to the launch of emu in 1999. the ems crises in 1992 and 1993 could have been fatal for the emu project and served to show that emu was not inevitable. however, the crises also underlined the political will of europe's leaders and showed that they were ready to adopt difficult measures in order to move on to economic and monetary union. apart from an ever - stronger underlying political will, two long - term structural factors which prepared the way for the key decisions on emu can be singled out, namely, an increasing degree of economic integration and a growing consensus on macroeconomic policy objectives. economic integration in europe has advanced enormously over the last few decades. trade interdependence has increased. with growing financial integration in europe and more foreign direct investment flows, income from wealth has also become more internationally diversified. economic linkages between the european countries have therefore grown much stronger. this interde