banking. in wholesale banking, by contrast, cross - border operations are continuing to accelerate, with a focal point within the euro area. altogether, the growth rates of cross - border operations within the euro area are much higher than those of domestic operations in many lines of business. iii the higher degree of integration of the markets in europe at the same time ensures stiffer cross - border competition. credit institutions ’ interest - based business is more strongly affected by that than their off - balance - sheet operations, which generate commission earnings. however, the focal point of the business of many banks continues to lie in traditional, interest - based business. on the continent, banks ’ receivables from domestic lending operations are far higher - both in absolute terms and relative to gdp - than, for instance, in the capital - market - based financial system of the united states. thus the virtually global decline in margins in banking business is reflected particularly clearly here. although the share of non - interest - based receipts in the aggregate operational revenue of continental european banks has gone up sharply in recent years, in the dynamic and profitable field of commission - based business ( e. g. investment banking or asset management ), many credit institutions are still lagging distinctly behind the banks in english - speaking countries. the often - cited “ return on equity ” ( roe ) figure of over 20 % reflects magnitudes which have yet to be attained. altogether, the pressure on the banks to substitute other receipts for the relatively declining interest income is increasing. a strategy geared merely to greater volume and higher risks in lending business in order to stabilise or increase profitability could not work in the long run, and at all events could be no substitute for the requisite structural change. further efforts will also be needed on credit institutions ’ expenditure sides in order to enhance their profitability. a number of countries in the euro area, including germany, are sometimes designated as “ overbanked ” or “ overbranched ”. as a matter of fact in 1998, according to the latest imf figures, germany with about 1, 800 inhabitants per bank office was, by international standards, distinctly below the figures of the united states and japan ( about 4, 300 and 2, 900 inhabitants per bank office respectively ), and also below the united kingdom, where each bank office caters for about 3, 700 inhabitants. on the other hand, according to statistics of the oecd and bis, the number of staff members per bank office in

mr welteke ’ s following address on europe and the euro : the view from asia co - speaker ’ s address by mr ernst welteke, president of the deutsche bundesbank, following the lecture held by joseph c k yam, chief executive of the hong kong monetary authority, at the xii international frankfurt banking evening, held on 14 march 2000. * * * i mr yam, first of all i would like to thank you for coming here and for giving us a very interesting asian viewpoint of europe and the euro. as chief executive of the hong kong monetary authority, you have successfully steered your way through some turbulent times in the financial markets since the authority was set up in april 1993. we europeans also need a perspective from outside so that we can objectively assess our ambitious historic project of monetary union. for that reason alone, i feel it would be arrogant of me to offer a “ reply ” to your evaluation because the very concept of a “ reply ” implicitly suggests disagreement even if that is not intended. and so the organisers of this event and i have agreed that, in future, the reply from the bundesbank president will be dropped from the agenda. in the field of economic and financial policy there is no “ ideal path ” which should be followed by all countries in all circumstances. the economic and political settings in individual countries are simply too diverse. the cultural and social conditions also often differ widely. that is why it is so important to compare notes and to learn from one another. ii the respective economic developments in europe and in asia have likewise been characterised by very different conditions in the past few years. whereas in europe various national currencies, supported by convergent economic and monetary policies, were increasingly harmonised and finally moulded together in a monetary union, some of the exchange rate pegs in asia were strained to breaking point. hong kong was and remains one of the exceptions. even during the financial and economic crises in south - east asia in 1997 / 98, it managed to maintain its exchange rate peg to the us dollar. hong kong was like a rock in a stormy sea. for many foreign investors at the time it was - and remains - a firm anchor in the asian markets. but in fact, defending the currency board regime was by no means an easy task. in mid - 1998 many investors were wondering whether hong kong really would defend its exchange rate come hell or high water. for many this was the key question during the asian currency