mergers are now more common, both in trading and post - trade : e. g., nyse euronext ; lch. clearnet ; euroclear group. and alliances in the form of cross - border clearing and settlement links are also widespread, enabling, for instance, securities traded in italy to be settled and held in an account in the securities settlement system in germany. 30 commercial bank providers – namely, correspondent banks and global custodians – may be best placed to meet the demand for multicurrency settlement, leveraging their extensive international connections. this could then reinforce their important position in the infrastructural landscape. indeed, the major global custodians each posted growth in assets held in custody in excess of 20 % in just the past year. 31 and differences between the regulatory regimes for incumbent providers of infrastructure and those for either commercial bank providers or smaller new entrants could tilt the playing field. for example, cls is subject to close central bank scrutiny, operates as a narrow bank, and has to meet exacting – and costly – resilience standards. new clearing arrangements and bilateral netting schemes are now penetrating the foreign exchange markets, threatening the volumes passing through cls. in messaging, too, swift – which submits voluntarily to central bank oversight – is beginning to face competition in certain markets from new entrants not subject to oversight. authorities must be alert to the challenges these competitive developments provide. 32 other regulatory initiatives are contributing to a reshaping of the landscape. mifid, in the eu, and regnms, in the us, have sought to encourage increased competition in trading ; and the code of conduct, recently signed in the european union, establishes terms under which infrastructures operating in one member state can clear and settle ( initially equity ) trades in another. more than 20 applications have now been made under the terms of the code. 33 whether trading, clearing and settlement infrastructure markets can support a wide range of providers in the long - term remains an open question. there is generally a tendency towards concentration in infrastructure provision because of increasing returns to scale in a fixed cost business and often powerful network effects. this applies equally in the case of commercial bank provision of infrastructure : ecb survey evidence reveals that the ten largest correspondent banks in euro account for around 80 % of correspondent banking payment values ; and the top - 4 global custodians now account for three - quarters of total assets in custody. indeed

ms. rivlin reports on the positive perfomance of the us economy and the policies needed to sustain growth in the future testimony of the vice chairman of the board of governors of the us federal reserve system, ms. alice m. rivlin, before the committee on banking and financial services of the us house of representatives on 23 / 7 / 97. i would like to begin by expressing my appreciation to the committee for holding this hearing to solicit a wide range of views on appropriate monetary policy at this extremely favorable moment in our economic history. all too often congressional hearings are called when something bad is happening. in a deteriorating situation, congress finds it necessary to survey the damage, assess responsibility and call for better policies in the future. at the moment, however, the economy as a whole is functioning amazingly well. employment is high and rising, unemployment is low, incomes are increasing, profits are high, the federal budget deficit is plummeting, state and local finances are increasingly strong, and inflation is benign. the overriding economic objective - - shared by all participants in the economy - - is to keep the good news flowing. we all want the economy to grow at its highest sustainable rate, to keep unemployment and inflation low, and above all, to avoid recession as long as possible. thoughtful people, at the federal reserve and elsewhere, have somewhat different views about why the economy is doing so well and how best to keep it going. your invitation to share those views is timely, constructive and welcome. i would like briefly to discuss three questions : 1. 2. 3. why is the economy performing so well - - and, in particular, why do we have so little inflation with such low unemployment? why is it so important, especially right now, to keep the economy growing at its highest sustainable rate and to avoid recession? what policies - - monetary and other economic policies - - are most likely to keep economic performance high and sustained? why is the economy doing so well? most economists are frankly surprised that the economy has been able to grow fast enough to push unemployment rates below 5 percent without generating accelerating inflation. until recently, most students of the economy thought that unemployment rates below 5. 5 - 6. 0 percent ( estimates differed ) for an appreciable period would lead to rising labor costs that would be passed on in higher prices and start a self - perpetuating wage - price spiral that would be hard to reverse. true, unemployment had been lower