concept of the “ home market ” well beyond their home country ’ s borders. for example, nordic parent banks continued to provide liquidity to their baltic affiliates even during the years of the deepest crisis in the baltic economies. in today ’ s slow growth environment, it remains important for competitiveness and growth that there should be an appropriate level of financing in the whole region. the broader concept of the “ home market ” should be developed further. one of the challenges will be to ensure strong competition in retail markets so that the benefits of integration could be felt by consumers across the region. fostering sustainable growth in the region requires us to take a systemic view when designing harmonized regulation for the financial sector, and this is where the quality and proactivity of macro - prudential supervision becomes so important. the nordic - baltic dimension adds two nuances to the design of macro - prudential policies. first, our own experience of the past decade was a stark reminder of the particular challenges of managing capital flows in highly integrated economies and financial sectors. second, most of the large nordic banking groups have been considered as too big to fail in almost all countries in the region. bis central bankers ’ speeches diversity in the financial sector structures is a challenge for cross - border cooperation as i said earlier, the economies and financial sectors of the nordic - baltic region are diverse as well as closely integrated. different countries in the region have opted for different policy frameworks ; the structure of the financial sector also differs by country. it turns out that in a region of only eight countries, some of which are very small, one needs to tackle very much the same array of problems that make the coordination of financial sector policy and supervision so challenging in europe. there are home and host countries ; there are non - eu member states, eu member states, and euro area member states. there are differences in economic, lending and asset price cycles, and there are also differences in economic history, crisis experience and institutional arrangements. the developments in recent years have exacerbated these dissimilarities and perhaps even created new ones. it appears to me that the success in combining the positive aspects of diversity and integration in the nordic - baltic region may serve as a model for the european union. if cooperation and coordination has been possible in this region, there is reason to hope for the same in the european union as a whole. cooperation between the institutions responsible for financial stability in the region has a history of over 10 years.

integration through a higher correlation in economic cycles - as well as lower transaction costs and lower risk premiums. it is also clear that emu participation reduces monetary uncertainty. for instance, had it not been for the emu, european financial markets could probably have been much more turbulent during the asian and russian crises and the recent slowdown of the global economy. for an accession country, a rapid erm - emu accession could mean a further rise in its international credibility - take, for example, the developments in greece who clearly benefited from erm2 credibility in 1999, after the asian crisis. in case of estonia, our earlier policy choices have resulted in an environment characterized by the openness of the economy - export and import reaching 179 - 180 % of the gdp, by a stable fixedexchange - rate, by a long tradition of balanced fiscal stance and rapid integration with the european markets - all of them features favourable to a relatively rapid real convergence. we could even say that the convergence that presently takes place in our real economy takes place in a de facto emu environment. according to an analysis recently conducted by the ecb, the correlation of manufacturing industries'business cycles between estonia and the five larger emu member countries is even higher than that for some of the present member countries, the correlation of overall economic cycles is slightly lower but that is due to the more rapid economic growth in estonia compared to the euro area. but there is one more important aspect i would like to stress in this context - and that is the crucial role of the financial system in real convergence under a currency board based fixed exchange rate regime. it is fair to say that estonian banking system is presently strong, well capitalized and liquid. the banks'forced reliance on their own capital and liquidity has had a direct impact on the market structure. strategic foreign ownership - mostly by scandinavian financial groups - has provided estonian banks with both strong capitalization and transfer of international best practices. at the present time estonian banking sector is responsible for a significant share of the profits of their owners. profitability means effectiveness at least comparable to the financial sectors of our neighbouring eu member countries and a somewhat greater flexibility of production factors, especially the flexibility of labour markets. profitability also means a relatively rapid adoption of new technologies. for example, the number of card payments per capita in estonia should be roughly equal to the respective german figures while the share of internet banking customers is somewhat higher ( and the list of internet - based bank services somewhat more