competitive in the retail market. in the segment of large enterprises, however, production and distribution are perhaps more difficult to separate. this may imply that many nordic banks are too small to compete for the business of large and advanced customers. competition in this segment is perhaps more international than nordic. how does cross - border integration change the risk outlook for the financial system? if it improves the long - term profitability, and thus the robustness of institutions, it is clearly advantageous. spreading production costs over a larger customer base may improve profits. in addition, cross - border competition might lead to efficiency gains and a spillover of best practices. however, there are also counter - arguments. for example, increasing the size of operations may reduce management focus. in general, more integrated financial markets can spread financial unrest between countries more easily. this could have a negative effect on financial stability. on the other hand, banks with activities in several countries should be in a stronger position to cope with a recession or a crisis situation in a given country than banks whose activity is confined to one single country. this is positive from a financial stability point of view. 5. 2 the internet as a distribution channel for financial services let me now turn to the impact of the internet on the banking and financial services industry. the internet creates new opportunities for traditional banks. for example, banks should be well positioned to become key operators in trading on the internet. they have a large customer base and strong brand names, and can offer payment transmission services, advertising space and links on their home pages. internationally, many banks have agreements with internet or telecommunication companies for the development of internet banking and marketplaces on the internet. this is probably just the beginning of a trend towards increased cooperation across industry boundaries. the internet poses great challenges as well. it is clearly intensifying competition in the industry. this is partly because it is easier for customers to compare prices and terms and partly because it is simpler for new operators to penetrate the market. the internet may also change the relative positions of existing market participants. many nordic banks have established some form of internet banking. so far, most services offered on the internet are relatively simple, for example loan applications, bill payments and account transfers. these are probably the most important services for the majority of customers. several banks also offer trading in shares and fund units on the internet. the product range and user - friendliness can be expected to increase in the period ahead. i ’ m sure discussions during this conference

inflation in line with inflation in the euro area. monetary policy was therefore oriented towards bringing inflation over time into line with that aimed at by the european central bank. guidelines for economic policy in norway on 29 march, the government issued new guidelines for monetary policy. monetary policy shall now be oriented towards low and stable inflation. the operational target of monetary policy is consumer price inflation of 2½ per cent. at the same time, new guidelines for fiscal policy were drawn up, providing for the use of petroleum revenues over the central government budget equivalent to the expected real return on the government petroleum fund. the new guidelines for monetary policy did not entail any significant change in the conduct of monetary policy. quantifying an inflation target, in line with international practice, has made it easier to explain and understand norwegian monetary policy. the implementation of monetary policy monetary policy influences the economy with considerable and variable lags. our analyses indicate that a substantial share of the effects of an interest rate change occurs within two years. two years is thus a reasonable time horizon for achieving the inflation target of 2½ per cent. the effects of interest rate changes are uncertain. in addition, it may be difficult to assess the current situation. different indicators may point in various directions and economic statistics are normally published with a lag. this suggests that a gradualist approach to setting interest rates is appropriate. we will then acquire new knowledge and can adjust interest rates underway. if evidence suggests that inflation will be higher than 2½ per cent with unchanged interest rates, the interest rate will be increased. if it appears that inflation will be lower than 2½ per cent with unchanged interest rates, the interest rate will be reduced. there is symmetry here. it is just as important to avoid an inflation rate that is too low, as it is to avoid an inflation rate that is too high. economic policy in the euro area the introduction of the euro on 1 january 1999 also meant the introduction of a single monetary policy in the eleven member countries. greece joined as the twelfth country on 1 january 2001. the population of the euro area is a little more than 300 million and the euro area economy accounted for about 16 per cent of world gdp last year. 1 price stability is the primary objective of the single monetary policy in the euro area. the governing council of the european central bank has defined price stability as a year - on - year increase in the harmonised index of consumer prices ( hicp ) for the euro area of below 2 per cent. the project