to make a substantial reduction in systemic risk. or, to be more precise, how to reduce systemic risk without restraining or patronizing financial markets but rather by improving their functioning. a lot of work is under way to find ways of doing this. improved transparency should foster the self - control and self - discipline of the markets. that includes different aspects such as : more and better data on the debt structure of individual countries, the application of standards for banking supervision, improved disclosure of risk positions of market participants. of course, in the case of a national sovereign crisis, financial assistance too might play a role. therefore, we have agreed to fill up the imf ’ s reserve tanks. such assistance, however, has to be bound to conditionality, to an incentive to redeem the official credits and to a fair burden - sharing between official and private sectors. if the talk of a lender of last resort means only that kind of financial assistance, i don ’ t mind. even though that expression might not be absolutely accurate. but we should not argue about words. but if lender of last resort in a broader sense means that draining liquidity and offering generous or even unlimited credit lines should be regarded as main response and that the international community should place its highest priority on such measures, i would be strongly opposed. a lender of last resort of that kind may be of intellectual interest for academic textbooks. in reality, such a role for the imf or another institution would severely hamper the functioning of the markets. the main point is : whatever the international community intends to do, the measure should — as far as possible — avoid creating incentives for moral hazard behaviour. for domestic policy - makers, this means that international assistance must not be seen as insurance either against dangerous exchange rate experiments or against a loss of credibility. for the markets, there should as few incentives as possible to underrate country - specific risks based on the hope of a later bail - out. so, in the first place, financial crisis and systemic risk do not lead to the question of the lender of last resort. instead, they lead to the question how to improve the framework. and that was the background to my report i presented to the group of seven ( g - 7 ) ministers and governors at their meeting in bonn on february 20, 1999. professor illing asked me to add some remarks on that report. i will follow that suggestion. iii as you know, my proposal to the g - 7 included con

addition, the forum should identify gaps in existing work, and propose appropriate means of filling such gaps. finally, the forum should, wherever possible, aim to produce concrete, implementable recommendations, as distinct from analytical reports stating alternative views. and it should monitor the implementation of those recommendations. iv two particular points have to be addressed further. firstly, the involvement of the private sector. the forum is asked to find flexible ways of drawing on private sector expertise. one way is for the forum to meet with the private sector immediately before or after the meeting. it would also be possible for sub - groups of forum members to meet the private sectors on other occasions. secondly, countries outside the g - 7 should be more involved. that can be done either be inviting qualified experts from outside the g - 7 to contribute to the activities of the working groups. or by inviting representatives from national authorities as guests in the forthcoming regular meeting of the forum. in the meanwhile, the first meeting has taken place. upon my proposal, the g - 7 ministers and governors have appointed andrew crockett to be the chairman of the forum for three years. that guarantees the necessary experience as well as continuity. three working groups have been established : - the working group on highly leveraged activities and institutions ; howard davis ( uk ) has the chair. the working group on short - term capital flows ; mario draghi ( italy ) has the chair. the working group on offshore centres ; john palmer ( canada ) has the chair. the second meeting is scheduled for mid - september. i am personally following the work of the forum with great interest, of course, but also at some distance because from september 1st onwards i shall be only an outside observer, but an interested one. and let me end with the following remark : if the forum can help to improve the international financial framework, it may make a greater contribute to coping with systemic risk than a lender of last resort ever could.