uk ’ s contribution to the bilateral support for korea. but such official financial help cannot be unlimited and it cannot be provided without strings. it, too, has real dangers. if it were too readily forthcoming it could encourage “ moral hazard ”, especially by encouraging commercial lenders - particularly foreign currency creditors - in the belief that they will be bailed out if things go wrong. that would be likely to add to the problem of potentially volatile capital inflows next time around. not surprisingly, too, there is strong political resistance in many countries, including notably the united states, to the idea that public - taxpayers ’ money should be used to bail out private creditors, especially foreign creditors. external financing need not come solely from the public sector. private finance would serve the same purpose, and in many situations market price adjustments may be sufficient to stem the capital outflow. but, given the extent of the loss of confidence in the asian case, organising private financial support meant in practice persuading existing creditors that their assets would be better protected if they were prepared to leave them in place, especially if other major private creditors agreed to do the same, and if official support were made available in parallel. but in this case, too, difficult judgements have to be made. there is a danger that, if private creditors have in effect to be coerced into staying put, they will immediately cut their positions elsewhere, while they still could, thereby adding to the international contagion. in fact, in the critically important case - because of its size - of korea, the promise of massive official support failed to restore market confidence. and when it became apparent that the official bilateral financing was in practice available only as the very last resort we - again with the central banks as the immediate intermediaries - had to turn to the commercial bank lenders in the major creditor countries and persuade them to extend the maturity of their loans. like most u - turns, it was a dangerous moment. but the banks ’ constructive response went a long way to stabilising the immediate situation in relation to korea - and thereby to the region as a whole. the creditor banks are also now in negotiation with indonesia ’ s bank and commercial non - bank debtors. i can ’ t pretend that we are completely out of the wood in terms of the external financial crisis in asia, but there is now at least a good deal more light between the trees. international attention is now extending to managing the economic fall

is hence particularly important. it is critical, for instance, to couple the internal separation between supervisory and monetary functions with an external dimension, reinforcing the outside perception of clear separation in terms of operations and accountability. these risks might be contained successfully with the appropriate institutional and organisational set - up. more caution is warranted amid the legal risks stemming from the draft regulation that is currently on the table. let me give some examples : under the trialogue compromise, the appointment of the vicechair of the supervisory board requires approval by the european parliament as well as an bis central bankers ’ speeches implementing decision by the european council. while the chair of the supervisory board does not necessarily belong to an independent eu body, the ssm draft regulation provides for the selection of the vice - chair by the governing council from among the members of the ecb ’ s executive board. the same applies to the dismissal procedures for the chair and vice - chair of the supervisory board. as this provision may be beyond the red line of the ecb ’ s statutory independence, and that of the executive board and of its members, it might be legally challenged and create a reputational risk should the ssm become subject to litigation. the foreseen de facto veto right of the european parliament to a nomination proposal of an ecb executive board member seems inappropriate, as a veto could be based on the following considerations. 1. the member ’ s past track - record on monetary policy or on other ecb basic tasks. this would be tantamount to a political interference on exclusive and independent ecb tasks. 2. the member ’ s prospective supervisory policy views. this would condition the member ’ s use of discretion in his or her supervisory activity, against the principle of supervisory operational independence. 3. any reason entailing a discrimination prohibited under the treaty and the eu charter of fundamental rights. moreover, there is already an institutional balance in the appointment procedure for executive board members, in which the european parliament opines on nominated candidates. such an institutional balance could be disturbed by the new veto right. strangely enough, for the primary ecb tasks the parliament “ merely ” opines, while it has a veto power for the secondary task – relating to a person already scrutinised by the parliament when appointed to the board ( and thus to the governing council ) and who is nominated by the governing council to an additional position in an internal ecb body. in addition, a parliamentary rejection or dismissal of an ec