be endorsed by the g 10 governors and heads of supervision before their publication at the end of june, i will be involved as well. last week the basel committee published a press release to announce that it had achieved consensus on the remaining issues so that i don ’ t expect that this endorsement could still prove problematic. the introduction of this new set of rules represents a milestone in the design of a more dynamic prudential environment, combining rules and discretion, supervisory monitoring and market discipline. this does however not mean that the work is now finished. the implementation of the new requirements will necessitate considerable efforts by the financial firms, the supervisory authorities and central banks. in order to facilitate that process the basel committee created an accord implementation group and european supervisors decided to cooperate more closely in order to achieve a greater convergence of supervisory practices. the legal work of implementing the new requirements in eu and national legislation will also be a huge task. it is therefore important that the closer interaction between the academic and regulator ’ s worlds which is one of the new features in the design of basel ii be maintained during the implementation phase. i hope that this conference will also contribute to this. other developments of our financial system i have mentioned before, such as the concentration process in the banking sector, the creation of financial conglomerates or bank - insurance companies and the development of cross - border activities, also call for a reassessment of our regulation mechanisms. however difficult it has proved to achieve a convergence between the national supervisory authorities in the banking sector, the next daunting challenge will most probably be, in my opinion, to enlarge that convergence to other segments of the financial system. i would like to thank all speakers and discussants taking part in this conference. i am also grateful to the belgian academic researchers and our own staff who have contributed to the research projects prior to this conference and, like all of you, i am looking forward to the presentations of their research results. finally, i would like to thank all of you for your attendance here today and i trust your participation in the discussions and question time will be very active. i hope this conference will help all of us to better understand the mechanisms underlying the recent financial developments as well as the policy responses which should accompany them.

for example, the differential between interest rates in interbank markets and bond markets has narrowed drastically, cross - border bond and mutual funds holdings have been increasing very rapidly, a market for private bond issuance has developed within europe and equity price fluctuations have been converging. these factors have induced a rapid growth of the financial markets and have facilitated the direct access of borrowers and savers to the markets. our traditional bank - oriented financial systems are gradually turning into a mixed organisation with substitution possibilities between bank and market - based financial products. the co - existence of and the competition between the two systems for allocating financial flows and risks in the economy should enhance economic efficiency, provided appropriate regulations, monitoring and supervision create the conditions for fair competition. against this background, the banking sector has experienced major changes. consolidation in the banking industry has been substantial. at the same time, banks have diversified their activities through mergers or by creating bank insurance groups. they have also been trading parts of their balance sheet assets and risks through financial markets. in addition, they have expanded their activities abroad, although further developments towards cross - border mergers and the creation of larger europe - wide banks can be expected. so the banking sector is now characterised by higher concentration, stronger competition from foreign banks and direct competition with financial markets. but what precisely will be the future role for banks in this new financial environment? theory and empirical evidence support the view that, as providers of finance, banks have the advantage of being in a position to acquire information on the borrowers and to monitor them thanks to long - lasting bank - lending relationships. this mitigates the effect of asymmetric information and moral hazard problems on the provision of funds. it is especially relevant to newly set up, small and medium - sized enterprises. this debate is not only important for banks, but for corporations themselves. indeed, it is regularly asserted “, - in various countries, not the least in belgium, that sme face increasing difficulties to get bank financing and that this problem could be compounded by the revised capital requirements imposed by the new basel ii agreement. i would like to emphasise two points. first, the new basel rules take expressly into account the specificities of sme. second, recent figures for belgium clearly indicate that, while large corporations have recently shifted to market financing, bank loans to sme keep increasing, and, moreover, are priced to rates which compare rather favourably to the ones applied in the rest of the eurozone.