still gives me nightmares. 1 after the dust settled, we had to grapple with the wider implications of the scandal for the market itself and particularly the role of regulatory oversight. we certainly could have used a tmpg to help us with this work, but none existed at that time. our recommendations were summarized in a joint report to the congress issued by the treasury department, the securities and exchange commission ( sec ), and the federal reserve board. among the issues we considered were how to encourage a level playing field for all market participants, and when and where regulators should respond to the periodic technical difficulties the market sometimes experienced. as we drew up the report, we were deeply aware of the importance that treasury markets held for the american economy. the sale of treasury bonds, notes, and bills finances the u. s. government, and those securities are in turn a primary vehicle for savings for a wide range of u. s. households. treasury securities are also an important source of collateral within the financial system. this last role has become all the more critical in recent years as regulations have required banks to hold larger amounts of high - quality liquid assets so that they can safely meet their potential liquidity needs. we also knew that, despite the misconduct by salomon brothers, treasury markets generally worked quite well. these markets are and have long been among the deepest and most liquid markets in the world. it was important to make the auction system more robust to potential manipulation, and we made several recommendations to do so and to open up the process to greater competition. however, in other areas that already worked well, we chose, for example, to 1 / 3 bis central bankers'speeches open up issuance of securities that were in short supply ( or “ squeezed ” ) when needed rather than to risk negatively affecting the functioning of treasury markets by instituting more invasive regulation. there is certainly a role for regulation, but regulation should always take into account the impact that it has on markets — a balance that must be constantly weighed. more regulation is not the best answer to every problem. there is also a role for a body such as the tmpg to address market problems. the tmpg ’ s approach to “ fails ” in the treasury and mortgage - backed securities markets provides a good example. fails — that is, the failure to deliver collateral in either a cash or repurchase agreement transaction — impose a cost on the party expecting delivery. if the practice were to become too frequent, then

the bank and the fsa which i am confident we can build upon, enabling us to withstand the strain when the first pink elephant is sighted! the standing committee of the treasury, bank and fsa has met each month over the past couple of years. cross - membership of our respective bank and fsa boards is firmly established. howard and i meet regularly together. and most fundamentally our respective staff are in more or less continuous contact at working level - it is a culture that we must continue to work together to maintain. to be honest i have felt as closely in touch with significant developments, even in the banking sector, as i did before and perhaps better informed about developments in the financial system more widely. in part this is because, without day by day responsibility for banking supervision, particularly its consumer protection dimension, the bank has been able to refocus on and develop its wider oversight role, focusing particularly on strengthening the market infrastructure, intensifying our surveillance and crisis management, both nationally and internationally. i think perhaps you can get the flavour of our broader focus if you look at our half - yearly publication the financial stability review. the next edition is due out in a fortnight or so, and i ’ m sure that my office would be happy to make it available to you for a small commission - or you can download it free from our website. so, chairman, although howard took with him responsibility for banking supervision, and some 20 % of our staff, to the fsa, the bank ’ s essential concern with, and responsibility for, the stability of the financial system as a whole - and its role in promoting the efficiency and effectiveness of the financial sector, including the promotion of the city - remain much as they were. what has more clearly changed over the past few years is the external environment within which we pursue these tasks. and in my remaining remarks i should like to comment on three particular developments - the introduction of the euro, the impact of information technology, and continuing broader financial globalisation which have increasingly preoccupied the bank in our work in these areas. first, the euro. whether the uk is in or out of the euro, the bank has a keen interest in its success as a widely used trading and investment currency - for the contribution that can make to financial stability, to financial sector efficiency, and to financial activity here in the city. well before its introduction, the bank played an active role in coordinating the city ’ s technical preparation for the euro, and in encouraging the